Forex Leverage Explained
What is leverage in forex, how it amplifies gains and losses, and how to use it responsibly.
Last reviewed: 2026-03-06
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Overview
Leverage allows you to control a larger position than your account balance would normally allow. For example, with 100:1 leverage, you can control $100,000 with just $1,000 in margin. This amplifies both profits and losses.
Leverage is expressed as a ratio (e.g. 50:1, 100:1, 500:1). Higher leverage means less margin required per trade, but also greater risk of a margin call or account wipeout if the market moves against you.
How It Works
When you open a leveraged position, your broker holds a portion of your account as margin. If your trade moves against you and your margin falls below the required level, you may receive a margin call and your position could be closed automatically. This is why risk management and position sizing are critical when using leverage.
Responsible Use
Beginners should use low leverage (e.g. 10:1 or 20:1) until they are comfortable with risk. Never risk more than 1-2% of your account per trade. Use stop losses on every position. Leverage is a tool, not a shortcut to riches.
FAQ
Common questions about this topic.
What leverage should beginners use?
Beginners should start with low leverage such as 10:1 or 20:1. This reduces the risk of rapid account depletion while you learn.
What is a margin call?
A margin call occurs when your account equity falls below the broker's required margin. The broker may close your positions to limit their risk.
Is high leverage dangerous?
Yes. High leverage (e.g. 500:1) can wipe out your account quickly with a small adverse move. Use leverage conservatively.
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Disclaimer and sources
Educational content only. Not financial advice.
Important disclaimer
Forex trading involves substantial risk of loss. Leverage amplifies risk.