Leverage Calculator

Leverage vs. margin: what is the difference

Leverage and margin describe the same relationship from opposite ends. Leverage is the multiplier on your capital; margin is the cash actually set aside to open and hold the trade. They are linked by a single formula:

Required margin = Position size / Leverage

Suppose you want to take a 50,000 position in a currency pair and your account allows 20x leverage. The margin needed is 50,000 / 20 = 2,500. Drop the leverage to 10x and the same position now requires 5,000 of margin. Higher leverage frees up cash but leaves less buffer between your entry and the point where the broker closes you out. Lower leverage ties up more capital but gives the trade room to breathe.

How much leverage should you use?

There is no single correct figure. The practical ceiling depends on the market and your jurisdiction, while the right level for you depends on how much you are willing to lose if the trade goes against you. The table below shows typical maximum leverage by market as a reference point, not a recommendation.

Higher leverage magnifies both gains and losses and shrinks the distance between your entry and liquidation. Most consistent traders size from risk first: they decide what a losing trade may cost, then back into a position size, and only afterward check what leverage that implies. The available maximum is a limit, not a target.

Worked example: profit and return on margin

Say you commit 1,000 of margin and open at 10x leverage. Your notional exposure is:

Notional = Margin x Leverage = 1,000 x 10 = 10,000

The price then moves 3% in your favour. The gain is calculated on the full notional, not on your margin:

Profit = Notional x 3% = 10,000 x 0.03 = 300

That 300 profit is measured against the 1,000 you actually put up, which gives the return on margin:

Return on margin = Profit / Margin = 300 / 1,000 = 30%

A 3% price move turned into a 30% return on the capital deployed, exactly the 10x multiplier at work. Reverse the price move and the same trade loses 300, a 30% hit to your margin. The calculator above runs this in both directions so you can stress-test a setup before risking anything.

Liquidation and risk

Leverage shrinks the adverse move it takes to wipe out your margin. A rough rule for an isolated position is that the move to liquidation is about 100% divided by your leverage, before fees and maintenance buffers. At 10x, a roughly 10% move against you erases the margin; at 50x, only about 2%; at 100x, around 1%. Ordinary intraday noise can cover those distances in seconds.

This is why leverage should follow your stop, not lead it. Decide the price at which you are wrong, size the position so the loss at that stop stays within your risk budget (commonly 0.5% to 2% of equity), and confirm the implied leverage leaves comfortable room above the liquidation price. Treating leverage as the starting point instead of the result is the fastest way to be closed out by a move you would otherwise have survived.