Leverage lets you control a large position with a small deposit. Margin is that deposit: the amount your broker sets aside from your balance while the trade is open.
How margin is calculated
Margin = position value ÷ leverage
One standard lot of EUR/USD at 1.0850 is worth 100,000 euros, or about $108,500.
| Leverage | Margin required |
|---|---|
| 1:10 | $10,850 |
| 1:30 | $3,617 |
| 1:100 | $1,085 |
| 1:500 | $217 |
Margin requirements are often expressed as a percentage instead: 1:30 is 3.33% margin, 1:100 is 1%. Use the margin calculator for any pair, leverage and account currency.
The key point: leverage doesn’t change your pip value
One standard lot of EUR/USD is worth about $10 a pip whether you use 1:30 or 1:500. Leverage only changes how much of your balance is tied up. What makes leverage dangerous is that it allows you to open positions far too big for your account. The protection is to size every trade from your stop loss and a fixed risk percentage. See lot sizes explained.
Equity, free margin and margin level
- Balance: your account value excluding open trades.
- Equity: balance plus or minus the floating profit or loss on open trades.
- Used margin: the total margin locked by open positions.
- Free margin: equity minus used margin. This is what is available for new trades.
- Margin level: equity ÷ used margin × 100%.
Margin calls and stop-outs
If losses push your margin level down to the broker’s margin call level (often 100%), you may be warned or blocked from opening new trades. If it falls further to the stop-out level (often 50% or lower), the broker starts closing your positions automatically, usually the biggest loser first, at whatever price is available.
A stop-out is not a strategy. It means a position was too large or had no stop loss.
Leverage limits vary around the world
Regulators in many regions cap retail leverage on major currency pairs, for example at 1:30 or 1:50, while some offshore brokers offer 1:500 or more. Higher available leverage is not a benefit if you are sizing trades properly. Choose a broker regulated by a credible authority where you live, check whether it offers negative balance protection, and be cautious of offers built around very high leverage or deposit bonuses.
A practical rule
Keep total used margin well below your equity. Many traders aim to use no more than 10–20% of their equity as margin across all open positions, and never risk more than 1–2% on any single stop loss.