Leverage
Also called: margin ratio
The multiple of your account size you're allowed to trade — 1:100 leverage means $1,000 controls $100,000 notional.
Definition
Leverage amplifies both gains and losses. A 1% price move on a fully leveraged 1:100 position is a 100% P&L move on the underlying margin. Regulated retail leverage caps: 1:30 (ESMA/FCA majors), 1:50 (NFA US majors), up to 1:500–1:1000 (offshore).
High leverage isn’t inherently bad — proper position sizing means you can use any leverage safely. But it does enable catastrophic mistakes.
Example
1:100 leverage. To trade 1 standard lot of EUR/USD (€100,000) you need $1,000 margin (and the equivalent value in EUR).
Formula
Leverage = Position notional / Margin used
Why it matters
Beginners blow up by using max leverage as license to oversize. The right size depends on stop distance and risk per trade, not on the broker's leverage cap.
FAQs
What's the safest leverage to use?
It's not about the leverage offered — it's about effective leverage you actually deploy. Risk 1% per trade with a reasonable stop and you're effectively running 5:1 to 20:1 regardless of broker cap.