Leverage and margin are two sides of one number
Leverage is the ratio; margin is the cash the broker locks up to support it. They are the same fact expressed differently: 1:10 leverage means a 10% margin requirement, 1:100 means 1%, and 1:500 means 0.2%.
The margin is not a fee. It is your money, held aside while the position is open and released when you close it.
The maths that catches people out
Leverage does not change how much the market moves. It changes how much that move is worth to you.
You have $2,000 and open a $40,000 position (1:20). The asset falls 3%. The position loses $1,200 — 60% of your account, from a move most people would not even notice on a chart.
Why regulated leverage caps exist
Regulators in the EU, UK and Australia cap retail leverage — commonly 1:30 on major currency pairs and 1:2 on crypto — because retail accounts using high leverage lose money at very high rates. Offshore brokers advertising 1:1000 are not offering a better product; they are offering a faster route to a margin call.
Using leverage without being used by it
- Size the position from your risk, not from the maximum the broker allows.
- Decide the stop-loss level before the leverage, never after.
- Treat available leverage as a ceiling you rarely approach, not a target.
- Track effective leverage — total position value divided by account equity — rather than the headline ratio.