Leverage lets you control a large position with a small amount of capital. It’s like a loan from your broker to increase your market exposure.
How Leverage Works
With 1:100 leverage:
- You deposit: $1,000
- You control: $100,000 (1 standard lot)
- Leverage ratio: 100:1
Common Leverage Ratios
| Leverage | Margin Required | Control $100K With |
|---|---|---|
| 1:10 | 10% | $10,000 |
| 1:30 | 3.33% | $3,333 |
| 1:50 | 2% | $2,000 |
| 1:100 | 1% | $1,000 |
| 1:500 | 0.2% | $200 |
Profit & Loss Impact
1 lot EUR/USD with 1:100 leverage:
- Capital used: $1,085 (margin)
- 1 pip movement = $10
- 100 pip profit = $1,000 (92% return on margin!)
- 100 pip loss = -$1,000 (92% loss!)
Leverage by Region
| Region | Max Retail Leverage |
|---|---|
| EU/UK | 1:30 |
| Australia | 1:30 |
| USA | 1:50 |
| Offshore | 1:500+ |
Key Rules
- Higher leverage = Higher risk
- Use leverage conservatively (1:10 to 1:30 recommended)
- Always use stop losses
- Never risk more than 1-2% per trade