Leverage and Margin
A 1-minute lesson from the MarketPro academy, one of 24 in forex basics.
Leverage lets you control a position larger than your account balance. With 1:100 leverage, 1,000 USD of margin can control a 100,000 USD position.
What leverage is
Leverage lets you control a position larger than your account balance. With 1:100 leverage, 1,000 USD of margin can control a 100,000 USD position. The broker lends you the difference and holds part of your balance as margin — a good-faith deposit for the open position.
The critical point: leverage multiplies both directions
Leverage amplifies losses exactly as much as gains. A 1% adverse move on a fully leveraged 1:100 position wipes out 100% of the margin backing it. This is why high leverage is the single fastest way for new traders to lose an account. Regulators in many jurisdictions cap retail leverage precisely because of how consistently it harms inexperienced traders.
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Step 6 of 12 on Forex Foundations
Run the numbers while this is fresh
The arithmetic in this category has a free calculator on this site, no sign-up and nothing leaves your browser: Pip value calculator, Position size calculator, Margin calculator, Leverage calculator.
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Not investment advice. Past performance is not indicative of future results.