Leverage
Trading BasicsA mechanism that allows you to control a position larger than your deposit. Expressed as a ratio like 1:30, meaning $1 controls $30 in currency.
What Is Leverage in Forex?
Leverage lets you control a large position in the market using a relatively small deposit called Margin. If your broker offers 1:30 leverage, you can open a $30,000 position with just $1,000 in your account. Leverage amplifies both potential profits and potential losses by the same factor.
Common Leverage Ratios
Leverage limits vary by jurisdiction. Under ESMA rules (EU, EEA), retail traders are limited to 1:30 on Major Pairs and 1:20 on Minor Pairs. In the US, the limit is 1:50. In Australia under ASIC rules, it is also 1:30 for retail clients. Some offshore brokers offer up to 1:500 or higher, but higher leverage means higher risk of rapid account depletion.
Using Leverage Responsibly
The availability of high leverage does not mean you should use it all. Professional traders typically use effective leverage of 5:1 to 10:1, even when higher ratios are available. The key is to size your positions based on your Stop-Loss distance and risk tolerance, not on maximum available leverage. Our Margin Calculator shows exactly how much margin you need for any position size and leverage ratio.
Related Terms
Margin
The deposit required to open and maintain a leveraged position. Margin is not a fee. It is collateral held by the broker while your trade is open.
Margin Level
The ratio of account equity to used margin, expressed as a percentage. Margin level = (Equity / Used Margin) x 100%. Below 100% typically triggers a margin call.
Gearing
Another term for leverage in trading. Gearing describes the ratio of your position size to your actual capital. A gearing ratio of 20:1 means you control a position 20 times larger than your margin deposit.
Margin Call
A notification from your broker that your account equity has fallen below the required maintenance margin level. If triggered, you must either deposit additional funds or close positions to restore your margin ratio.
Risk-Reward Ratio
The relationship between how much you risk on a trade and how much you stand to gain. A 1:2 risk-reward ratio means you risk $1 to potentially make $2.