Free margin is the amount of equity in a trading account that is not being used as margin for open positions. It represents the funds available to open new trades or absorb losses on existing positions. When free margin reaches zero, the broker may issue a margin call.
Example
“With $10,000 in equity and $6,000 used as margin for open positions, the trader had $4,000 in free margin available to open additional trades or absorb unrealized losses.”