Leverage and margin

Leverage lets you control a large position with a small amount of your own money. Margin is that amount the broker sets aside as collateral.

How it works

With 1:100 leverage, US$1,000 of margin can control a US$100,000 position. Leverage is often expressed as a ratio (1:30, 1:100, 1:500) or as a margin percentage (1:100 = 1% margin).

The double edge

Leverage multiplies both gains and losses relative to your deposit. The same move that would be a modest gain unleveraged becomes large when leveraged — and so does the loss. A small adverse move against a heavily leveraged position can wipe out the margin.

Margin call and stop-out

If losses erode your account below the required margin, the broker issues a margin call and, if it continues, a stop-out — automatically closing positions to prevent your balance going negative.

The professional view

Experienced traders treat high leverage as available rather than to be used. The danger is not the leverage ratio itself but using it to take oversized positions. Control your risk through position size and stop losses, and high leverage becomes a convenience rather than a threat. Note that many regulators cap retail leverage precisely because misuse is so common.