Guide
Forex leverage and margin explained
Leverage lets you control a position larger than the cash in your account. Margin is the portion of that position your broker sets aside. Both are central to forex risk and are often misunderstood.
What a leverage ratio means
Leverage is written as a ratio such as 1:30 or 1:500. A ratio of 1:30 means that for every 1 unit of your own money, you can hold a position worth 30. The higher the ratio, the less of your own money is tied up for a given position size.
Maximum leverage is capped by regulators in many jurisdictions and varies by instrument and client type. The limit that applies to you depends on the legal entity you trade with and your classification, not on the broker brand alone.
How required margin is calculated
Required margin is the position size divided by the leverage, converted to your account currency. A 100,000 EUR/USD position at 1:30 needs about 1/30 of its value as margin.
Used margin reduces the free margin available for new trades. If losses push your equity below the broker's maintenance level, positions can be closed automatically in a margin call or stop-out.
Why leverage cuts both ways
Leverage magnifies both gains and losses relative to the money you put up. A small adverse move on a highly leveraged position can wipe out a large share of your account.
Because of this, position sizing and a planned stop-loss matter more than the headline leverage number. Our position size and margin calculators let you see the figures before you trade.
Questions
Does higher leverage mean a better broker?
No. Higher leverage only means more exposure for the same deposit, which increases risk. It is not a measure of broker quality, and permitted limits depend on your regulator and client classification.
What is a margin call?
A margin call is a warning, or an automatic action, when your account equity falls too far relative to the margin your open positions require. The broker may close positions to prevent further loss.
How do I calculate required margin?
Divide the position size by the leverage ratio and convert to your account currency. Our margin calculator does this for forex, metals, indices, crypto and shares.
This is general information, not financial advice. Trading leveraged products such as forex and CFDs carries a high risk of losing money. See how we verify facts in our methodology, use our trading calculators, or browse all guides.