Leverage
Borrowed notional from your broker that lets a small deposit control a large position - in both directions.
Borrowed notional from your broker that lets a small deposit control a large position - in both directions.
Leverage multiplies exposure, not skill. With 30:1, a $1,000 deposit can control about $30,000 of currency, so a 1% favourable move returns roughly 30% on your margin - and a 1% adverse move costs 30%. The broker lends the difference and secures it with the margin in your account, which is why the same multiplier that accelerates gains accelerates losses until the account can no longer support the position.
Regulators cap the ratio by jurisdiction - 30:1 for major pairs under ESMA rules, 50:1 in the United States, far higher in offshore venues - and the cap is the single most consequential difference between a regulated broker and an unregulated one. Leverage should be treated as a position-size input, not a target: the question is never 'how much can I borrow' but 'how far can price move against me before my stop is placed'.
Worked example
With 50:1, $2,000 of margin supports a $100,000 position - one standard lot. A 50-pip move is worth about $500 on that lot: a 25% gain or loss on your deposit from a 0.5% price change. The leverage did not change the market; it changed what the market does to you.
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