Free margin is a difference between Equity in an account and the Margin of the open orders.
Free margin = Equity – Margin
When you don’t have open orders, money in your account is not used as a margin. All equities, therefore, are accessible for trading.
E.g., you have $10,000 in your account and opened the orders with an overall margin of $900 which bring you a profit of $400. In this case, the Equity and Free margin will have the following values:
Equity = $10,000 + $400 = $10,400
Free margin = $10,400 – $900 = $9500
Free margin is significant for assessing the deposit utilization rate and risk management. The low values of free margin may lead not only to the inability to open new orders but also to Stop Out on minor dips.