Leverage lets you control a big trade with a small deposit. Margin is the part of your own money the broker locks for that trade.
What leverage means
With leverage of 1:100, each dollar in your account controls 100 dollars in the market. The broker lends the rest.
One standard lot of EUR/USD is 100,000 euros. At 1.0842 that is about 108,420 dollars. Your own money needed:
| Leverage | Margin for 1.00 lot |
|---|---|
| 1:30 | about 3,614 dollars |
| 1:100 | about 1,084 dollars |
| 1:500 | about 217 dollars |
The trade is the same size in every row. Only your locked money changes. Gains and losses are counted on the full 108,420.
The numbers on your account window
- Balance: your money from deposits and closed trades.
- Equity: balance plus or minus the open trades. This is what you have right now.
- Margin: money locked for open trades.
- Free margin: equity minus margin. The room you have left.
- Margin level: equity ÷ margin, as a percent. The broker watches this number.
Margin call and stop-out
- Margin call, often at 100 percent. The platform warns you. You cannot open new trades.
- Stop-out, often at 50 percent. The broker closes your trades for you, biggest loser first.
A stop-out is not a punishment. It is the broker protecting the money it lent you.
Example
You deposit 1,000 dollars at 1:100. You buy 0.50 lot of EUR/USD. Margin locked is about 542 dollars.
- Each pip on 0.50 lot is worth 5 dollars.
- The price drops 90 pips. You lose 450 dollars. Equity is 550. Margin level is about 101 percent.
- A few more pips down: margin call.
- At 146 pips down, equity is 271 dollars. Margin level hits 50 percent. Stop-out.
A 146-pip move is a normal day on EUR/USD. The problem was not the leverage. It was a trade far too big with no stop loss.
How to stay safe
- Put your own stop loss on every trade.
- Risk 1 to 2 percent of equity per trade.
- Keep total margin used under 10 percent of equity. In the example that means 0.05 lot, not 0.50.
- Ask your broker about negative balance protection before you deposit.
Leverage decides how far your money stretches. Lot size decides how much is at risk. The lot sizes guide shows how to pick it.
Questions, answered plainly.
What does leverage 1:100 mean?
For every 1 dollar of your own money, the broker lets you control 100 dollars in the market.
What is a margin call?
A warning from the broker that your equity has fallen close to the margin locked in your open trades, so you must add money or close positions.
Can I lose more than my deposit?
Not with brokers that offer negative balance protection, so ask about it before you open an account.