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Leverage and margin, explained without the hype

How leverage lets you control a large position with a small deposit, and why margin, not leverage, is the number to watch.

Leverage is the ratio between the size of a position and the money you have to put up to open it. At 1:100, a 100,000-unit position needs 1,000 units of margin. At 1:500 it needs 200.

Margin is that deposit. It is not a fee; it is set aside while the position is open and released when it closes. Your free margin is what remains to open new positions or absorb losses.

Higher leverage does not change how much a position can win or lose. A one-pip move on a standard lot of EUR/USD is 10 dollars whether your leverage is 1:30 or 1:500. What changes is how much of your account is tied up and how close a loss brings you to a margin call.

A margin call happens when your equity falls to a set percentage of the margin used, 50% on our accounts. At the stop-out level, 30%, positions are closed automatically starting with the largest loser.

The practical rule: pick your position size from the amount you are willing to lose and your stop distance, then check that the margin required leaves you plenty of room. Leverage is a tool for capital efficiency, not a reason to trade bigger.

Educational content, not investment advice. Trading CFDs carries a high level of risk.

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