Leverage and Margin

Leverage and margin — what 1:100 really means for your balance

Forex is traded on margin: you put up a fraction of a position's full value, and the platform advances the rest. Leverage is the ratio between the position size you control and the margin you must hold — 1:100 leverage means a $1,085 position needs only 1% of that, or $10.85, of your own money tied up as margin.

Worked example

Say you have a $1,000 account and open 0.10 lots of EUR/USD at 1.0850.

• Position size: 0.10 lots = 10,000 units
• Notional value: 10,000 times 1.0850 = $10,850
• At 1:100 leverage, required margin = 1% of notional = $108.50
• Free margin after opening: $1,000 minus $108.50 = $891.50

At 1:500 leverage, the same position would need only $21.70 of margin, leaving more free margin. This is the part people misunderstand: higher leverage does not reduce your risk on the trade — the position is still 10,000 units of EUR/USD either way, and a 50-pip move against you still costs the same $50 (0.10 lot times $1/pip times 50 pips) regardless of whether your leverage is 1:50 or 1:500. What leverage changes is how much of your balance is locked up as margin, and therefore how much room you have before a margin call or forced stop-out — not how many dollars a given price move costs you.

The honest part

Leverage is what makes forex accessible with a small deposit, and it is also what makes losses arrive faster than they do in unleveraged investing: a small adverse move on the underlying price can be a much larger percentage move against your account equity, depending on your position size relative to your balance. Regulators in most jurisdictions require brokers to disclose that a majority of retail clients lose money trading leveraged products — that is not marketing language, it is a documented pattern, and it is true of this product too. Nothing in this course, or anywhere on this platform, should be read as a claim that you are likely to profit. Leverage is a tool with real mechanics, covered here so you understand exactly what it does to your account — not a reason to expect a particular outcome.