Excess Margin Deposit


DEFINITION of 'Excess Margin Deposit'

Funds deposited in a trading account beyond what is required to fund basic margin requirements. The total balance on the account equals excess margin deposits plus margin. Investors can typically open an account and start trading with only a percentage of the total security value deposited. This is called trading on margin.

BREAKING DOWN 'Excess Margin Deposit'

In the forex market, an excess margin deposit may arise due to a currency trade returning to profitability after the trader has pumped in additional margin because of an earlier margin deficiency. It can also arise through a currency trade becoming significantly profitable shortly after initiation.

Traders may withdraw excess margin deposits if they reach a significant level, since excess capital in margin accounts pays little or no interest. However, nominal amounts of excess margin deposits may be left in the trading account as a cushion against margin calls triggered by adverse price movements.

  1. Buying On Margin

    The purchase of an asset by paying the margin and borrowing the ...
  2. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  3. Margin Call

    A broker's demand on an investor using margin to deposit additional ...
  4. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  5. Forex - FX

    The market in which currencies are traded. The forex market is ...
  6. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
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