What Is Leverage?
Leverage is the ability to control a large trading position using a relatively small amount of your own capital. When your broker offers 1:100 leverage, it means for every $1 in your account, you can control $100 worth of currency.
Think of it as a loan from your broker. You put up a small amount (margin), and the broker lends you the rest to open a larger position.
What Is Margin?
Margin is the amount of money your broker holds from your account as collateral when you open a leveraged position. It is NOT a fee — it is locked while the trade is open and returned when the trade closes.
Use our Margin Calculator to find the exact margin required for any trade.
Leverage Examples
| Leverage | Margin % | 1 Lot Margin (EUR/USD) | Amplification |
|---|---|---|---|
| 1:10 | 10% | $10,800 | 10× |
| 1:30 | 3.33% | $3,600 | 30× |
| 1:100 | 1% | $1,080 | 100× |
| 1:500 | 0.2% | $216 | 500× |
Understanding Margin Calls
A margin call occurs when your account equity falls below the required margin level. At this point, your broker will either:
- Notify you to add funds or close positions
- Automatically close your positions (margin stop-out)
Most brokers have a margin call level (typically 100%) and a stop-out level (typically 20-50%). Once your margin level drops to the stop-out threshold, your broker automatically closes losing positions.
Safe Leverage Guidelines
Important: The leverage your broker offers is the maximum available. You don't have to use all of it. A better approach is to use our Position Size Calculator to determine the right lot size based on your risk, regardless of available leverage.
Regulation and Leverage Limits
Financial regulators worldwide have set maximum leverage limits to protect retail traders:
- EU/UK (ESMA/FCA): 1:30 for major pairs, 1:20 for minors
- Australia (ASIC): 1:30 for major pairs
- USA (CFTC/NFA): 1:50 for major pairs, 1:20 for minors
- Offshore brokers: Up to 1:3000 — use extreme caution
FAQ
Can I lose more than my deposit with leverage?
Most regulated brokers offer negative balance protection, meaning you can't lose more than your deposit. However, some brokers (especially offshore) may not offer this, so always check your broker's policy.
Should I use the highest leverage available?
No. Higher leverage doesn't mean you should open bigger positions. Use position sizing to determine lot size based on your risk tolerance, not on available leverage. Our Position Size Calculator takes care of this.