Leverage

Leverage is the ratio between the size of the position you control and the capital (margin) you put up, supplied by the broker as borrowed buying power. In forex it is unusually high — retail leverage can range from around 30:1 in tightly regulated regions to 500:1 or more elsewhere — because currency moves are small in percentage terms. The arithmetic is symmetric and unforgiving: at 100:1, a 1% market move equals a 100% swing on your margin, so leverage amplifies drawdowns just as fast as profits. High leverage also shrinks the cushion before a margin call or stop-out, meaning ordinary volatility can force you out of trades. Many experienced traders deliberately use far less leverage than the maximum offered, treating it as a ceiling to stay well below rather than a target.

In plain English — Leverage lets you control a position much larger than the cash in your account by effectively borrowing the rest. It is expressed as a ratio like 30:1 or 100:1, meaning each dollar of your own money controls 30 or 100 dollars of currency. The key truth is that leverage magnifies losses exactly as much as it magnifies gains — a small adverse move can wipe out a large slice of your account. It is a tool, not free money, and high leverage is one of the most common reasons beginner accounts blow up.

With 100:1 leverage, $1,000 of your own money can control a $100,000 position (one standard lot). A 1% move in your favour roughly doubles your money — but a 1% move against you can wipe it out entirely.