Crude Oil Leverage & Margin, Margin Required, Equity, Used Oil Trading Margin & Free margin

Margin required : It's amount of money your oil broker requires from you to open a position. It is expressed in percentages.

Equity : It is total amount of capital you have in your trading account.

Used margin : amount of money in your account that has already been used up when buying a oil lot, this contract is one that is displayed in open positions. As a trader you can not use this amount of money after opening a trade transaction because you've already used it & it is not available to you.

In other words, because your oil broker has opened up a position for you using the capital you've borrowed, you must maintain this usable margin for your trading account as a security to allow you to continue using this oil leverage he has given you.

Free margin : amount in your trading account that you can use to open new trades. This is amount of money in your account which hasn't yet been oil leveraged because you've not yet opened a transaction with this money - this money also is very important for you as a trader because it enables you to continue holding your open trades as will be explained below.

However, if you over use oil leverage, this free margin will drop below a certain percent at which your oil broker will have to close all your positions automatically, leaving you with a big loss. The oil broker at this point closes all your position because if your positions are left open they would lose the money you've borrowed from them.

This is why you should always make sure you've a lot of free margin. To do this never trade more than 5 percent of your crude oil account, in fact 2 percent is recommended.