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Basics
Leverage & margin
Leverage & Margin
Leverage lets you open a larger position with a smaller amount of capital. That can amplify profits, but it amplifies losses too.
The key thing beginners miss: leverage does not change your profit per pip. It changes how much margin your broker locks to keep a position open. Your real risk still comes from lot size and your stop loss.
Leverage & margin (what matters)
- Lot size: controls money per pip (risk dial)
- Leverage: controls margin required (not pip value)
- Stop loss: defines the loss you accept if you’re wrong
- Best habit: size trades with position sizing
High leverage doesn’t create profits — it makes mistakes more expensive.
Forex leverage and margin explained
- Leverage: expressed like 30:1 or 100:1 (rules vary by region and broker).
- Margin: the amount your broker sets aside to keep a leveraged position open.
- Margin call / stop out: if losses reduce your free margin too much, your broker can close trades. Learn more in margin call or stop out.
Leverage does not change pip value
Your profit/loss is driven by position size and the market move. Leverage mainly changes margin — how much of your account is locked to hold the position.
- Same lot size: same profit/loss per pip
- Lower leverage: more margin required for the same trade
- Higher leverage: less margin required, but easier to oversize
If you want the measuring “units” explained (pips, points, pipettes), use Pips vs Points.
Margin terms you’ll see on platforms
Most platforms show the same basic margin numbers. You don’t need advanced math — just understand what each one means.
- Balance: your account value without open P/L
- Equity: balance + open P/L (moves with the market)
- Used margin: the amount locked to hold positions
- Free margin: what’s left to absorb losses or open trades
- Margin level: a health metric your broker watches
Quick margin logic (simple)
The exact formula depends on instrument and broker, but the logic is always the same: required margin rises when position size rises, and it falls when leverage rises.
- Bigger lot size: more margin required
- Lower leverage: more margin required
- Same trade: profit/loss per pip stays the same
Want a practical sizing workflow? Start with How to calculate lot size.
How leverage causes beginners to blow up
- Oversizing: using big lot sizes just because the platform allows it.
- No stop loss: skipping a stop because “there is margin”.
- Forced close: holding losers until a margin call/stop out closes trades.
Two protections to understand (don’t skip)
These topics matter most when markets move fast, spreads widen, or price gaps. This page stays high-level — use the deep dives for details.
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