What is leverage?

Last updated: 4 May 2026

Leverage is a credit line your broker extends to you so you can control a forex position larger than your deposit. A broker offering 30:1 leverage lets you control €30,000 of currency with €1,000 of your own capital. The other €29,000 is the broker's exposure on your behalf.

The headline ratios

• EU / UK retail: capped at 30:1 for major pairs, 20:1 for non-majors (ESMA / FCA rules).
• US retail: capped at 50:1 for majors (CFTC / NFA rules).
• Offshore brokers: commonly offer 100:1 up to 500:1 or higher. Higher leverage is available because the regulator can't restrict it.
• Professional / institutional accounts in the EU: typically 100:1+ after qualification.

What leverage actually changes

Leverage only changes how much margin (deposit) is required to open a position. It does not change pip value, P&L, spread cost, or any other money-out-money-in calculation. A 1 standard lot EUR/USD trade has the same $10 per pip whether you're on 30:1 or 500:1.

What 500:1 vs 30:1 changes is how many positions you can have open simultaneously before margin runs out. Higher leverage = more capacity = more rope.

Worked example

Account balance: $1,000. You want to buy 1 standard lot of EUR/USD at 1.10. Notional position size: $110,000.

• At 30:1 leverage: required margin = 110,000 / 30 = $3,667. You can't take this trade — not enough margin.
• At 100:1 leverage: required margin = 110,000 / 100 = $1,100. Still over your balance — also can't take it.
• At 500:1 leverage: required margin = 110,000 / 500 = $220. Trade fits, with $780 free.

Now EUR/USD drops 50 pips (= $500 on a 1 lot position). Your account drops from $1,000 to $500. You've lost half your capital on a 0.5% market move. That's leverage in action — and why brokers pair it with margin calls.

The retail trap

New traders mistake high leverage for “more buying power” and assume it makes profits bigger. It doesn't — it lets you take oversized positions, which makes adverse moves catastrophic. Empirically, almost all retail blow-ups happen on accounts using leverage above the regulated cap.

Professional traders typically use far less leverage than is available — most use under 5:1 effective leverage on any single trade — because they size by risk percentage, not by maxing out margin.

The right mental model

Don't think “what's the maximum position I can open with this leverage?” Think “what's a stop-out cost I can afford?” That's the position size calculator's whole job.

Related calculators

• Position Size Calculator — start from risk-per-trade and work backward to lot size, regardless of leverage.
• Margin Calculator — exact margin required for a given position and leverage.
• What is a margin call? — what happens when leverage works against you.