Module 2: Trading Fundamentals
Leverage
6 min read
Leverage lets you control a large position with a small deposit, which magnifies both gains and losses.
How leverage works
With 1:30 leverage, $1,000 of margin can control a $30,000 position. A 1% move in the market then changes your account by about 30% of the margin used.
Regulators in several regions cap retail leverage. For example, the EU and UK cap major forex pairs at 1:30 for retail clients. Limits vary by jurisdiction and entity.
The real risk
High leverage does not change the market; it changes how much a move affects you. The safest approach is to size positions from risk and treat available leverage as a ceiling, not a target.
Example: Small move, large effect
A $30,000 EUR/USD position moves 1% against you: a $300 loss. If you only had $1,000 in the account, that is 30% of your capital.
Key takeaways
- Leverage magnifies gains and losses equally.
- Retail leverage caps vary by regulator.
- Use position sizing, not maximum leverage.
Educational content only, not financial advice. Trading forex and CFDs involves significant risk of loss.