How Leverage Works
10:1 leverage: $1,000 capital, $10,000 position. If the position moves 5% in your favor: +$500 profit (+50% return on capital). If it moves 5% against you: -$500 loss (-50%). A 10% adverse move wipes out your entire capital.
Forex leverage typically ranges from 1:50 to 1:500, though regulators in many countries (EU: 1:30, Turkey: 1:10, US: 1:50) cap it for retail traders due to the high risk.
What Is a Margin Call?
As a leveraged position moves against you, the collateral (margin) in your account depletes. When it falls below the broker's minimum margin requirement, you receive a margin call — deposit more funds or the broker will forcibly close your position.
The "stop out" level is the point of automatic position closure, typically when margin usage hits 50% of the maintenance requirement.
Who Should Use Leverage?
Leverage is designed for experienced short-term traders with disciplined risk management. Studies consistently show 70–80% of retail CFD/forex traders lose money, in large part due to leverage.
If you have long-term investment goals, avoid leverage entirely. If you must use it, start at 1:1 (no leverage) and only add leverage after demonstrating consistent profitability.