How it works
With 1:200 leverage — the level our partner brokers offer — you only need to put up one two-hundredth of the position's value as collateral. To control a position worth $200,000, your broker locks $1,000 of your capital — that's called margin. The rest you effectively "borrow" from the broker for as long as the position is open.
The crucial part: profit and loss are calculated on the full position value, not on your margin. If the market moves 1% in your favor you make $2,000 — 200% on your capital. If it moves 1% against you, you lose just as much.
Same move, very different outcomes
Example: you have $10,000 in your account and the market moves 1% against you.
| Position size | Leverage effect | Result of −1% | Share of account |
|---|---|---|---|
| $10,000 | None | −$100 | −1% |
| $100,000 | 1:10 | −$1,000 | −10% |
| $2,000,000 | 1:200 | −$20,000 | account wiped out |
At full leverage, a move of half a percent against you is enough for the broker to force-close your positions — the account is gone before you can react. That's where the "leverage killed my account" stories come from — even though it was really the position size that did it.
Margin call and stop out
When your losses eat into your free capital, two things happen:
- Margin call — the broker warns you that your equity no longer covers the margin requirement. You need to close positions or deposit more funds.
- Stop out — if it keeps going the wrong way, the broker closes your positions automatically, typically when equity falls to around 50% of required margin. You're no longer deciding — the platform is, at whatever price happens to trade at that moment.
Leverage is not the enemy — position size is
Many beginners think "high leverage = high risk." Almost right, but it misses the point. Leverage only defines what you can do — your risk is decided by what you actually do. A trader with 1:500 leverage taking small positions with stop losses runs less risk than one with 1:10 going all in.
The professional rule of thumb is to count backwards:
- Decide how much of your account you risk per trade — commonly 0.5–2%.
- Decide where your stop loss goes — at the level where your idea is demonstrably wrong, not at a round number. (And remember the spread can widen and touch your stop earlier than the chart suggests.)
- Derive your position size from those two — the stop distance and the risk amount tell you exactly how many lots you can take.
Do it that way and leverage becomes what it's meant to be: a tool that frees up capital, not a gas pedal to the floor.
Three rules that keep you alive
- Never risk more than a couple of percent of your account per trade — so you survive the losing streak that will come sooner or later.
- Always use a stop loss — a leveraged position without a stop isn't trading, it's gambling.
- Never add to a losing position — "averaging down" with leverage is the fastest road to a stop out.
Frequently asked questions
What does 1:200 leverage mean?
With 1:200 leverage you can control a position 200 times larger than the capital you put up as collateral (margin). With $1,000 in margin you control a position worth $200,000 — and both profits and losses are calculated on the full position value.
Can I lose more than I deposited when using leverage?
Most reputable brokers offer negative balance protection — your account cannot go below zero. Check that yours has it. You can, however, lose your entire deposit quickly if your positions are too large, because leverage magnifies every move.
Is leverage dangerous for beginners?
Leverage itself is just a tool — the danger is positions that are too large relative to the account. A trader who risks a small fixed share of the account per trade and always uses a stop loss can use leverage without it becoming dangerous.