Lesson 16 of 69
Leverage and margin
8 min read
Chapter checkpoints
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lets you control a position far larger than your deposit. At 1:100 leverage, $1,000 controls $100,000 of currency. is the slice of your balance the broker locks up as collateral while that position is .
1:30
Margin for 1 lot
$3,617
1:100
Margin for 1 lot
$1,085
1:500
Margin for 1 lot
$217
The maths
Required margin = position value ÷ leverage. One standard of EUR/USD at 1.0850 is worth $108,500. At 1:100 that needs $1,085 of margin; at 1:500 it needs $217.
| Leverage | Margin for 1 lot | Free margin left on $2,000 |
|---|---|---|
| 1:30 | $3,617 | Cannot open the trade |
| 1:100 | $1,085 | $915 |
| 1:500 | $217 | $1,783 |
Leverage does not create risk — size does
This is the part almost every beginner gets wrong. Higher leverage only reduces the margin required. Your actual risk comes from and stop distance. A 0.01 lot trade is equally low-risk at 1:30 or 1:500. The danger is that high leverage makes an oversized position possible.
Margin call and stop out
= ÷ used margin × 100. Drop below your broker's margin-call level and you cannot open new trades; drop below the stop-out level and the broker starts closing your positions automatically, worst loser first.
Signs you are over-leveraged
- A single trade uses more than about 10–20% of your balance as margin.
- A normal 30- move against you costs more than a few percent of the account.
- You watch the P/L number instead of the chart.
- You move or remove stops because the loss 'feels' too big — a sizing problem, not a problem.
Rule of thumb
Use leverage for flexibility, not for size. Pick the your 1% risk allows, and let leverage simply free up margin you never intended to spend anyway.
Key takeaways
- Leverage lets you control a large position with a small deposit — it magnifies both sides.
- Margin is the deposit locked up while the position is open, not a fee.
- High leverage does not force big risk; your lot size does.
- Free margin is your buffer — when it runs out, positions start closing automatically.
Knowledge check
3 quick questions — your best score is saved to your progress.
1. What does leverage actually do?
2. Margin is best described as…
3. What really determines how much you risk on a trade?
Progress is saved on this device.
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