What Is Leverage in Trading?

Leverage lets you control a large position with a small deposit, called margin. With 1:30 leverage, $1,000 controls a $30,000 position. It magnifies both gains and losses.

Leverage and margin

Leverage is written as a ratio such as 1:30 (or 30:1). It’s the flip side of the margin requirement: 1:30 means you deposit 1/30 of the position value, or 3.33%.

LeverageMargin requiredMargin for a $100,000 position
1:250%$50,000
1:1010%$10,000
1:303.33%$3,333
1:1001%$1,000

How leverage magnifies results

You have $1,000 and open a $30,000 position (1:30). If the market moves 1% in your favour, you make $300: a 30% gain on your $1,000. If it moves 1% against you, you lose $300, or 30%. A 3.33% move against you would wipe out the whole deposit. Profit and loss are based on the full position, not on the margin.

Margin calls and stop-outs

Your broker tracks your margin level (equity ÷ used margin). If losses push it down to the broker’s margin call level, you may be asked to add funds or be blocked from opening new trades. At the stop-out level, the broker starts closing your positions automatically. These levels differ by broker. In fast markets, losses can exceed your deposit unless your account has negative balance protection.

Leverage limits for retail traders

Many regulators cap retail leverage. Under the EU’s ESMA rules, which the UK’s FCA also adopted, the limits are 30:1 for major currency pairs, 20:1 for other pairs, gold and major indices, 10:1 for other commodities and indices, 5:1 for individual shares and 2:1 for crypto CFDs. US forex dealers are limited to 50:1 on major pairs and 20:1 on others. Limits elsewhere vary, and professional clients can get higher leverage.

Calculate it

The margin calculator shows the margin for any lot size and leverage; the position size calculator sizes a trade by how much you’re prepared to lose, which matters more than the leverage available. For crypto futures, see the crypto leverage calculator with its liquidation estimate.

Educational explanation only. ChartWatch is independent and doesn’t give trading or investment advice. Trading carries a risk of loss.

FAQ

What is leverage in trading?
Using borrowed capital to control a larger position than your deposit. With 1:30 leverage, $1,000 of margin controls a $30,000 position.
Is higher leverage better?
No. Higher leverage lets you open bigger positions, which magnifies losses as much as gains. The position size you choose matters more than the maximum leverage available.
What is a margin call?
A warning from your broker that your account equity has fallen too low relative to the margin your open trades need. If it keeps falling, the broker may close positions (a stop-out).
What leverage can retail traders use in the EU and UK?
Up to 30:1 on major currency pairs, 20:1 on other pairs, gold and major indices, 10:1 on other commodities and indices, 5:1 on shares and 2:1 on crypto CFDs.

More free TradingView tools

Margin CalculatorRequired margin for forex, gold and CFD trades. Position Size CalculatorLot size from your account, risk and stop loss, plus risk:reward. Crypto Leverage CalculatorCrypto position size, margin, liquidation estimate and max leverage. What Is Forex?How the currency market works, in plain English.
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