What leverage really does | Leverage and margin

Leverage lets you open a position bigger than your deposit. It does not change the market — it changes how much each move matters to your account.

Position size versus deposit

With 1:100 leverage, $1,000 of margin can hold a $100,000 position. A 1% move in price is then $1,000 — the whole deposit.

The broker is not lending you skill, only size. The same 1% move against you costs exactly as much as a 1% move in your favour pays.

The idea

Leverage multiplies both profit and loss by the same amount. Higher leverage means smaller price moves have a bigger effect on your account.

Apply the idea

Before a trade, work out what a 1% move against you would cost in money. If that number would hurt, the position is too big — whatever leverage you have.

Key takeaway

Choose position size from the money you are willing to lose, not from the maximum leverage available.