Education - beginner
Leverage in Trading — Amplifying Your Market Exposure
Leverage lets you control larger positions with a smaller deposit. Understand how leverage works, margin requirements, and the risks of over-leveraging.
Leverage is one of the most powerful features of forex trading, allowing you to control larger positions with a relatively small deposit. However, it amplifies both profits and losses.
What is Leverage?
Leverage is expressed as a ratio — for example, 1:100 means you can control $100 for every $1 of your own capital. If you have $1,000 in your account and use 1:100 leverage, you can open positions worth up to $100,000.
How Leverage Works
When you open a leveraged position, you only need to deposit a fraction of the total position value. This deposit is called the margin.
Example: With 1:500 leverage and a $1,000 account:
Margin Requirements
Margin requirements vary by broker and asset class:
| Leverage | Margin Required |
|----------|-----------------|
| 1:500 | 0.20% |
| 1:200 | 0.50% |
| 1:100 | 1.00% |
| 1:50 | 2.00% |
| 1:10 | 10.00% |
The Double-Edged Sword
Leverage amplifies both gains and losses. A 1% move on a 1:100 leveraged position equals a 100% change in your account balance.
Example: You deposit $1,000 and use 1:100 leverage. A 1% adverse move in EUR/USD (-$1,000) would wipe out your entire account.