Leverage, margin and margin calls explained

Leverage lets you control a big position with a small amount of money. It makes both wins and losses bigger.

Leverage and margin

Leverage is written like 1:30 or 1:100. At 1:100, every $1 in your account can control $100 of currency. The money set aside to open a trade is called margin.

Margin = position size ÷ leverage

Worked example

You buy 1 standard lot of EUR/USD (100,000 euros) when EUR/USD is 1.1000. That position is worth $110,000.

• At 1:100 leverage, margin = $110,000 ÷ 100 = $1,100.
• At 1:30 leverage, margin = $110,000 ÷ 30 = about $3,667.

Either way, each pip is still worth about $10. Leverage changes how much money is set aside, not how much you win or lose per pip. Your position size decides that.

Margin calls and stop-outs

If losing trades drag your account's equity down close to the margin in use, your broker may send a margin call (a warning). If it keeps falling, the broker can stop you out: close your trades automatically. The exact levels are different at every broker, so check yours.

Why high leverage is dangerous

High leverage makes it easy to open trades far too big for your account. A small move against you can then wipe out a large part of it. Many regulators cap leverage for everyday traders for this reason.

Calculate margin and position size →

For learning only, not financial advice. Trading on margin is high risk.