Leverage
Borrowed exposure that lets you control a position larger than your deposit. At 1:30, $1,000 of margin controls a $30,000 position.
Leverage changes how much margin a trade ties up, not the profit or loss per pip. That is why sizing from your stop loss matters more than the leverage you choose.
In practice
With 1:30 leverage, opening one standard lot of EUR/USD worth about $108,000 needs roughly $3,600 of margin. At 1:500 it needs about $217. The profit or loss per pip is about $10 in both cases.
Choosing high leverage and then filling it. Leverage should give you room, not set your position size. Size from your stop loss and risk percentage instead.
Related terms
Margin
The deposit your broker sets aside to keep a leveraged position…
Margin call
A warning, or a block on new trades, when your margin level falls…
Contract for difference (CFD)
A derivative that pays the difference in an asset’s price between…
Overleveraging
Opening positions too large for the account, so a normal move…
Balance
Your account value from closed trades, deposits and withdrawals,…
Broker
The firm that gives you access to the market, holds your funds and…