Calculate the required margin to open a leveraged position. Understand exactly how much of your account is locked up as collateral and how much buying power you have.
What Is Leverage?
Leverage allows you to control a larger position than your account balance would normally allow. With 50:1 leverage, you can control $50,000 worth of currency with just $1,000 of your own capital. The remainder is borrowed from your broker.
Margin formula: Required Margin = Position Size ÷ Leverage Ratio
Example: $100,000 position at 50:1 leverage = $100,000 ÷ 50 = $2,000 margin required
The Risks of High Leverage
High leverage amplifies both gains AND losses. A 1% adverse move on a 100:1 leveraged position wipes out 100% of your margin — your account is gone.
- 1:1 leverage: A 50% drop = 50% loss. You can recover.
- 10:1 leverage: A 5% drop = 50% loss
- 50:1 leverage: A 1% drop = 50% loss
- 100:1 leverage: A 0.5% drop = 50% loss. Game over.
This is why proper position sizing matters more than leverage. Use our Position Size Calculator to size trades based on risk, not on leverage availability.
Frequently Asked Questions
What is margin in trading?
Margin is the amount of money required to open a leveraged position. It's not a fee — it's collateral that's held by your broker while the trade is open. When you close the position, your margin is released back to your account.
How is required margin calculated?
Required Margin = Position Size ÷ Leverage Ratio. For a $100,000 position at 50:1 leverage: $100,000 ÷ 50 = $2,000 margin required.
What is a margin call?
A margin call happens when your account equity falls below your broker's required margin level. The broker either forces you to add funds or automatically closes your positions to prevent further losses (called a "stop out").
What's the maximum leverage I can use?
It depends on your jurisdiction and broker. EU regulators (ESMA) cap retail forex leverage at 30:1. US caps it at 50:1 for major pairs. Offshore brokers may offer 500:1 or higher, but this dramatically increases risk.
Should I use high leverage?
Generally no. Professional traders rarely use more than 5:1 effective leverage on any single trade, even when the broker offers 100:1 or more. The leverage offered is a maximum, not a target. Size your positions based on risk per trade, not on how much leverage you can access.