What Is Leverage in Forex? Margin, Margin Calls and Lot Size (2026)

What leverage actually is

Leverage is written as a ratio — 1:30, 1:100, 1:500 — or the other way round as 30:1, 100:1, 500:1. Both forms mean the same thing: how many dollars of position one dollar of margin is allowed to support. Brokers and regulators also express it as a margin requirement in percent, which is simply one divided by the leverage. 1:30 is a 3.33% margin requirement, 1:100 is 1%, 1:500 is 0.2%.

A standard lot of EUR/USD is 100,000 euros. No retail account is putting up 100,000 euros to trade it. Instead you post margin — a good-faith deposit that the broker ring-fences while the trade is open — and your profit and loss accrue on the full 100,000. The margin is not a fee and it is not spent; it is released back to free margin the moment you close the position. What you win or lose is determined by how far the price moves and how big the position is. The leverage ratio does not appear anywhere in that calculation.

That is the single most misunderstood point in retail forex, and it is worth stating plainly: raising your leverage from 1:30 to 1:500 does not make the same trade riskier. A 0.10-lot EUR/USD position gains or loses $1 per pip on either setting. What higher leverage does is let you open a much larger position than you otherwise could — and that larger position is what destroys accounts. If the vocabulary of pips and lots is new, start with our guide to pips, lots and position sizing, then come back here.

What leverage changes

Leverage changes everything that depends on how much collateral a position ties up: the margin required to open it, the free margin left for other trades, the largest position the account can open at all, and — for a position of a given size — how far the market must move against you before the broker steps in.

What leverage does not change

It changes nothing that depends on position size: pip value, profit or loss per pip, the dollar cost of the spread, the overnight swap, or your effective leverage (the position's value divided by your equity). The table sets the two lists side by side, for one and the same position.

What changes when you raise an account's leverage setting, holding the position size constant.

Quantity	Changes with leverage?	Why
Margin required to open	Yes — falls	Margin = position value ÷ leverage
Free margin left	Yes — rises	Equity minus a smaller used margin
Largest position you can open	Yes — rises	Maximum position value = equity × leverage
Distance to margin call for this position	Yes — further away	Smaller used margin means a higher starting margin level
Pip value	No	Set by lot size and the quote currency
Profit or loss per pip	No	Pips moved × pip value
Spread cost in money	No	Spread in pips × pip value
Overnight swap	No	Charged on the position size
Effective leverage	No	Position value ÷ equity; the account setting is not in it

Read the fourth row carefully, because it runs against intuition. For a position you have already decided on, a higher leverage setting puts the margin call further away, not closer, because less of your equity is tied up as margin. The reputation high leverage has earned comes entirely from the third row: it removes the ceiling that would otherwise stop you from opening a position far too large for your account.

How margin is calculated

The formula is the same on every platform:

Margin = lots × contract size × price of the base currency in your account currency ÷ leverage.

For EUR/USD traded from a US-dollar account, the base currency is the euro and its price in dollars is the EUR/USD rate itself. At an illustrative price of 1.0850, one standard lot (100,000 euros) is worth 100,000 × 1.0850 = $108,500. At 1:100 the margin is $108,500 ÷ 100 = $1,085. At 1:500 it is $217. Use the live price when you do this yourself; the rate here is only there to make the arithmetic visible.

Margin to open EUR/USD from a USD account at an illustrative price of 1.0850, by leverage and lot size (rounded to the cent).

Leverage	Margin requirement	1.00 lot (standard)	0.10 lot (mini)	0.01 lot (micro)	Pip value (1.00 / 0.10 / 0.01)
1:10	10%	$10,850.00	$1,085.00	$108.50	$10 / $1 / $0.10
1:20	5%	$5,425.00	$542.50	$54.25	$10 / $1 / $0.10
1:30	3.33%	$3,616.67	$361.67	$36.17	$10 / $1 / $0.10
1:50	2%	$2,170.00	$217.00	$21.70	$10 / $1 / $0.10
1:100	1%	$1,085.00	$108.50	$10.85	$10 / $1 / $0.10
1:200	0.5%	$542.50	$54.25	$5.43	$10 / $1 / $0.10
1:500	0.2%	$217.00	$21.70	$2.17	$10 / $1 / $0.10
1:1000	0.1%	$108.50	$10.85	$1.09	$10 / $1 / $0.10
1:2000	0.05%	$54.25	$5.43	$0.54	$10 / $1 / $0.10

The last column is the one to stare at. Across a two-hundred-fold range of leverage, the money made or lost per pip does not move by a cent. Margin scales with leverage; risk scales with lots.

Margin on EUR/USD also drifts slightly as the price moves, because the dollar value of 100,000 euros changes with the rate. On a position that is 50 pips against you the drift is under 0.5% of the margin figure, so the worked examples below hold margin constant to keep the arithmetic readable. Where an example runs to hundreds of pips the drift is no longer negligible, and those figures are marked as approximate.

Pairs with the US dollar as the base currency

When the dollar is the base currency — USD/JPY, USD/CHF, USD/CAD, USD/ZAR — and your account is in dollars, no exchange rate is needed at all. One standard lot is $100,000, full stop, so the margin is $100,000 ÷ leverage: $3,333.33 at 1:30, $1,000 at 1:100, $200 at 1:500. What does depend on the rate is the pip value, because a pip on those pairs is paid in yen, francs, Canadian dollars or rand and has to be converted back into your account currency.

USD/ZAR in rand: the pair that needs no exchange rate for pip value

USD/ZAR is quoted in rand, and a pip is 0.0001, so one standard lot is always worth ZAR 10 per pip, a mini lot ZAR 1 and a micro lot ZAR 0.10 — whatever the rate happens to be. For a South African trader with a rand-denominated account, that makes risk arithmetic on USD/ZAR unusually clean.

Margin, on the other hand, does depend on the rate. At an illustrative rate of 1 USD = 18.00 ZAR (use today's rate), one lot is worth ZAR 1,800,000. Margin is ZAR 90,000 at 1:20, ZAR 18,000 at 1:100 and ZAR 3,600 at 1:500.

There is a trap in USD/ZAR pip counts that catches traders who learned on EUR/USD. At a price near 18.00, a 1% move is 0.18 — which is 1,800 pips. A 100-pip stop on USD/ZAR is a 0.056% move; the same 100 pips on EUR/USD at 1.0850 is a 0.92% move, about 16.6 times larger (18.00 ÷ 1.0850). Stops and targets on the rand need to be set in percentage or chart-structure terms, not by copying pip distances from the majors.

Equity, used margin, free margin and margin level

MetaTrader's Trade tab shows five numbers along the bottom — Balance, Equity, Margin, Free Margin and Margin Level — and every margin call and stop-out is decided by how they relate. Here is one account in one state: $1,000 deposited, one standard lot of EUR/USD open at 1:500 (margin $217), and the position 20 pips against you.

The five account figures, how each is calculated, and their values for a $1,000 account holding one losing lot of EUR/USD at 1:500.

Figure	How it is calculated	Value in this example
Balance	Deposits + closed profit/loss − withdrawals and costs	$1,000
Floating P/L	Open positions marked to the current price	−$200 (20 pips × $10)
Equity	Balance + floating P/L	$800
Used margin	Sum of margin on all open positions	$217
Free margin	Equity − used margin	$583
Margin level	Equity ÷ used margin × 100	368.7%

Balance changes only when a trade closes or money moves in or out. Equity changes with every tick. Free margin is what you have left to open new trades or to absorb further losses on the ones you hold. Margin level is the figure the broker's risk system watches: on most retail accounts, margin calls and stop-outs are defined as margin-level percentages. MetaTrader also lets a broker set them as an amount of money instead, so check which your account uses.

Two consequences follow. First, opening a second position does not just add risk; it adds used margin, which lowers the margin level of the whole account, so a loss on one trade can close another. Second, the margin level falls for two reasons — losses reduce the top of the fraction, new positions increase the bottom — and traders who only watch floating P/L tend to be surprised by the second.

What is a margin call in forex?

A margin call in forex is the point at which your account's margin level falls to a threshold set by your broker. At that point you are warned, and depending on the broker you may be blocked from opening new positions; you can add funds, close trades or wait. A margin call is a warning, not a liquidation. The liquidation is the stop-out: a second, lower margin level at which the broker's system starts closing your positions automatically, often starting with the largest loss, until the margin level recovers above the threshold or nothing is left open.

Both levels are set by the broker, per entity and sometimes per account type, and they are published in the account's contract specifications or client agreement. Some brokers set the margin call at 100%, some higher, some lower, and some do not use a separate margin call at all. Do not assume the numbers from one broker, or from an article, apply to yours — look them up before you trade.

A margin call, pip by pip

Take the $1,000 account again, holding one standard lot of EUR/USD long at 1:500. For illustration only, assume the broker's margin call level is 100% and its stop-out level is 50%. The spread and the small drift in margin are ignored.

A $1,000 account with one standard lot of EUR/USD at 1:500 (margin $217), assuming a 100% margin call and a 50% stop-out for illustration.

Adverse move	Floating loss	Equity	Margin level	What happens
0 pips	$0	$1,000	460.8%	Position open; $783 free margin
25 pips	$250	$750	345.6%	Nothing yet
50 pips	$500	$500	230.4%	Half the account gone; nothing from the broker
75 pips	$750	$250	115.2%	Free margin down to $33
78.3 pips	$783	$217	100%	Margin call: no new trades
89.15 pips	$891.50	$108.50	50%	Stop-out: position closed

Notice what the table shows: by the time the margin call arrives, 78% of the account is already gone. The margin call is not an early warning. It is a notice that the damage has been done. And the stop-out closed the trade only about 11 pips later, with 89% of the deposit lost on a move smaller than one percent of the EUR/USD price. Had this broker set its stop-out at 20% instead, the trade would have run to 95.7 pips and $956.60 before closing — a lower stop-out level is not more generous, it just lets you lose more before the position is cut.

Why stop-out levels differ between brokers and entities

In the European Union and the United Kingdom, ESMA's and the FCA's rules for retail CFD clients require the provider to close out positions at the latest when the account's equity falls to 50% of the margin required for the open positions — in platform terms, a 50% margin level. A broker may close earlier than that, but not later. The rule exists to stop retail accounts running all the way to zero.

ASIC imposes the same 50% close-out on retail clients in Australia. Outside those jurisdictions — and that includes the offshore entities that onboard many traders in Africa and the Gulf — the stop-out level is whatever the entity's terms say. It can be the same 50%, or it can be set well below it. Because the level decides how much of your deposit can disappear before a losing trade is closed, it belongs on your checklist next to spreads and withdrawal times.

Stop-out is not a stop-loss

A stop-out protects the broker from your account going negative. It does nothing for you: it fires at a point chosen by someone else, based on your whole account rather than on the trade, and usually after most of the equity is gone. The only tool that caps the loss on a trade at a level you chose is a stop-loss order, sized so that hitting it costs a fixed small fraction of the account.

Negative balance protection and price gaps

A stop-out closes positions at the next available price. When the market gaps — over a weekend, or on a shock announcement — that price can be far beyond the stop-out level, and the account can be left below zero. On 15 January 2015 the Swiss National Bank abandoned its 1.20 floor under EUR/CHF, and the pair traded below parity that same morning — a fall of more than 16% in a pair many retail traders had treated as stable. Stops were filled far from where they had been placed, and some traders ended the day owing their broker money.

Negative balance protection means the broker absorbs any loss beyond your account balance. ESMA and FCA rules require it for retail clients, and ASIC requires it in Australia. Elsewhere it is a matter of the broker's own policy: our data records it across every retail entity at Exness and XM, for example, but you should confirm it in the client agreement of the specific entity you sign with. The weekend gap risk itself is covered in our guide to forex trading sessions.

Effective leverage: the number that actually measures risk

If the leverage setting does not measure risk, what does? Effective leverage: the total value of your open positions divided by your equity. It tells you directly what a given percentage move in the market does to your account — a 1% move against a position at 10:1 effective leverage costs 10% of equity, whatever the account's leverage setting says.

Effective leverage and the result of a 1% adverse price move on a $1,000 account trading EUR/USD at an illustrative 1.0850.

Position	Position value	Effective leverage	Pip value	Loss on a 1% move	Share of equity
0.01 lot	$1,085	1.09:1	$0.10	$10.85	1.1%
0.10 lot	$10,850	10.85:1	$1	$108.50	10.9%
0.25 lot	$27,125	27.1:1	$2.50	$271.25	27.1%
0.50 lot	$54,250	54.3:1	$5	$542.50	54.3%
1.00 lot	$108,500	108.5:1	$10	$1,085	Account wiped out

A 1% move on EUR/USD at 1.0850 is 108.5 pips. The table makes the relationship exact: effective leverage multiplied by the market's percentage move gives your account's percentage move. That is the number worth controlling.

The account's leverage setting still matters in one way: it is a ceiling on effective leverage at the moment you open a trade. At 1:30 the $1,000 account above could open the 0.25-lot position (margin $904.17) but not the 0.50-lot one (margin $1,808.33). At 1:500 it could open any row in the table, including the one that loses the entire account on a 1% move. That is the whole case for and against high leverage in one sentence: it removes a ceiling, and the ceiling was sometimes the only thing standing between a trader and an oversized position.

Retail leverage caps in the EU and UK (ESMA and FCA)

Since August 2018 the European Securities and Markets Authority has limited the leverage that CFD providers may offer retail clients in the EU, and the FCA applies the same limits in the United Kingdom. National regulators enforce them — which is why a CySEC-licensed Cyprus entity or a BaFin-licensed German entity carries the same caps as an FCA-licensed UK one. The caps are set by asset class, as the maximum ratio of position value to initial margin.

ESMA and FCA maximum leverage for retail clients by asset class, with the equivalent minimum margin.

Asset class	Maximum leverage	Minimum initial margin	Margin on $10,000 of exposure	Examples
Major currency pairs	30:1	3.33%	$333.33	EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, EUR/GBP
Non-major currency pairs, gold, major indices	20:1	5%	$500	AUD/USD, NZD/USD, USD/ZAR, XAU/USD, major stock indices
Commodities other than gold, non-major indices	10:1	10%	$1,000	Oil, silver
Individual shares and other reference values	5:1	20%	$2,000	Single-stock CFDs
Cryptocurrencies	2:1	50%	$5,000	Bitcoin and other crypto CFDs

ASIC applies the same headline ratios to retail clients in Australia. In the United States, retail forex is limited to 50:1 on major currencies and 20:1 on others. Every one of these regimes treats 1:500 as something a retail client should not be offered.

Which pairs count as "major"?

Under the ESMA and FCA rules a major currency pair is any pair made of two of just six currencies: the US dollar, euro, Japanese yen, British pound, Canadian dollar and Swiss franc. The Australian and New Zealand dollars are not on the list, so AUD/USD and NZD/USD are capped at 20:1 at an EU or UK broker even though most traders think of them as majors. Every emerging-market pair, USD/ZAR included, is in the 20:1 group too. For the market's everyday labels, in which AUD/USD and NZD/USD usually are counted as majors, see our guide to major, minor and exotic currency pairs. The regulatory list is narrower, and it is the one that sets your margin.

Margin for one standard lot at the ESMA/FCA cap versus 1:500, from a USD account. EUR/USD, AUD/USD and gold prices are illustrative.

Instrument	Value of 1 lot	ESMA/FCA cap	Margin at the cap	Margin at 1:500
EUR/USD at 1.0850	$108,500	30:1	$3,616.67	$217
USD/JPY (any price)	$100,000	30:1	$3,333.33	$200
AUD/USD at 0.6500	$65,000	20:1	$3,250	$130
USD/ZAR (any price)	$100,000	20:1	$5,000	$200
XAU/USD, 100 oz at $4,000	$400,000	20:1	$20,000	$800

Gold contracts are commonly 100 troy ounces per lot, so each $1 move in the gold price is $100 per lot; check the contract size on your own platform, because it is not universal. Between the two regimes, the same lot needs 16.7 times as much margin at the cap on a major pair (500 ÷ 30) and 25 times as much on a non-major (500 ÷ 20). The 1:500 column assumes the account's leverage applies to every instrument. Brokers can set lower limits per instrument, and gold and exotic pairs are common candidates, so check the contract specifications before relying on it.

The rest of the retail package

The leverage caps come bundled with other protections that matter as much. Retail clients of EU and UK providers get the 50% margin close-out rule described above, negative balance protection on each account, restrictions on incentives to trade such as deposit bonuses, and a standardised risk warning that must state the percentage of that provider's retail accounts that lose money trading CFDs. Those published percentages are worth reading before you pick a broker; our article on why most retail traders lose looks at what drives them.

Professional clients

The caps apply to retail clients. A trader can ask to be treated as an elective professional client, which removes the caps along with the protections, but must meet at least two of three tests: an average of ten significant-size transactions per quarter over the previous four quarters, a financial-instrument portfolio including cash above EUR 500,000, or at least a year of work in the financial sector in a role requiring knowledge of the products. Offers to "upgrade" a retail trader to professional status without evidence of those tests are a warning sign, not a perk.

Why traders in Africa and the Gulf are offered 1:500 or more

The ESMA and FCA caps bind a broker's EU and UK entities, not the broker group as a whole. A trader in Lagos, Accra, Nairobi, Dar es Salaam, Cairo or Dubai who signs up with an international broker is usually not a client of the group's EU or UK entity at all. They are onboarded through a different entity — often one licensed offshore, in Seychelles, Belize, Vanuatu or the Cayman Islands — that is not bound by those caps and can offer 1:500, 1:1000 or more. Some groups also hold licences closer to home, such as the FSCA in South Africa or the DFSA in Dubai.

The table below takes the headline maximum leverage from FxReviewLab's own review data, alongside the entities each group holds. The headline figure is the highest the group offers on any entity; it is not available to retail clients of the Tier-1 entities, which cap major pairs at 30:1.

Headline maximum leverage and regulated entities for six broker groups, from FxReviewLab's review data.

Broker	Headline maximum leverage	Tier-1 entities (retail capped at 30:1)	Other entities in our data
Exness	Unlimited (Pro entity, conditions apply)	FCA 730729; CySEC 178/12	FSCA FSP 51024 (Tier 2); FSA Seychelles SD025 (Tier 3)
HFM	1:2000	FCA 801701; CySEC 183/12	FSCA FSP 46632 (Tier 2); FSA Seychelles SD015 (Tier 3)
IC Markets	1:1000	ASIC AFSL 335692; CySEC 362/18	FSA Seychelles SD018 (Tier 3)
XM	1:1000	CySEC 120/10; ASIC AFSL 443670	DFSA F003484 (Tier 2); IFSC Belize 60/354/TS/19 (Tier 3)
Pepperstone	1:500	ASIC AFSL 414530; FCA 684312; CySEC 388/20; BaFin 151148	DFSA F004356 (Tier 2)
Vantage	1:500	ASIC AFSL 428901; FCA 590299	FSCA FSP 51268 (Tier 2); CIMA 1383491, VFSC 700271 (Tier 3)

Licence details verified 14 June 2026 against each regulator’s own public register — the same check recorded on our broker reviews.

Our Exness review records its "unlimited" maximum as available only on its Pro entity, once eligibility criteria are met and while equity is below a defined threshold, with effective leverage tightening automatically as the account grows. Our data records each group's headline figure, not which entity offers it, so confirm the maximum on the specific entity you would join. Full entity breakdowns for each broker are in its review, reachable from our broker directory.

The higher leverage is not the only difference between entities. A Tier-3 entity is not bound by the 50% close-out rule or the EU and UK rules on negative balance protection, and its clients generally have less recourse if something goes wrong. An FCA entity, by contrast, can bring FSCS coverage of up to £85,000 per eligible client, which our Pepperstone review records. Before you deposit, find the name of the entity in your client agreement and check its licence number on the regulator's own register; our guide on how to verify a broker walks through it.

None of this makes 1:500 unusable. It makes it a tool that will let you do something the European rules were written to stop you doing — so the discipline has to come from your position sizing instead.

Nigeria and Ghana: the example in naira

With a US-dollar trading account, every margin and pip figure is in dollars, and the naira or cedi value of the account moves with the exchange rate even while no trade is open. At an illustrative rate of 1 USD = 1,500 NGN (use today's rate), a $1,000 account is NGN 1,500,000. A 0.10-lot EUR/USD position with a 30-pip stop risks $30, or NGN 45,000. The same 30 pips on a full lot — a position the account can open at 1:500 but not at 1:30 — is $300, or NGN 450,000: 30% of the deposit on a single ordinary stop.

Kenya and Tanzania: the example in shillings

At an illustrative rate of 1 USD = 130 KES (use today's rate), a deposit of KES 65,000 buys a $500 account. Risking 1% means $5, or KES 650, per trade. With a 25-pip stop on EUR/USD, that is $0.20 per pip — a 0.02-lot position. Its margin is $72.33 at 1:30 and $4.34 at 1:500; its effective leverage is 4.34:1 on either setting, and hitting the stop costs KES 650 on either setting. The higher leverage leaves more free margin. It does not change the trade. A Tanzanian trader works through exactly the same steps; only the conversion uses the Tanzanian shilling rate instead of the Kenyan one.

South Africa: the example in rand

A South African trader with a ZAR 20,000 account trading USD/ZAR does not need an exchange rate for risk: a 0.10-lot position is ZAR 1 per pip. For margin and effective leverage, at an illustrative rate of 18.00 (use today's rate), the position is worth ZAR 180,000 — effective leverage of 9:1 — and needs ZAR 9,000 of margin at the EU/UK 20:1 non-major cap or ZAR 360 at 1:500. A 1% move in USD/ZAR at that price is 1,800 pips, which at ZAR 1 per pip is ZAR 1,800 — 9% of the account, exactly as 9:1 effective leverage predicts.

United Arab Emirates: the example in dirhams

The UAE dirham is pegged to the US dollar at 3.6725, so no illustrative rate is needed: an AED 36,725 deposit is a $10,000 account. One standard lot of EUR/USD is AED 36.725 per pip. At an illustrative EUR/USD price of 1.0850, its margin is $3,616.67 (AED 13,282.21) at 1:30 and $217 (AED 796.93) at 1:500. UAE residents may be onboarded by a DFSA-licensed entity — Pepperstone and XM both hold one in our data — or by an offshore entity, so ask which before you open the account.

The same trade at 1:30 and at 1:500

Two traders each deposit $1,000 and buy 0.10 lot of EUR/USD at 1.0850 with a 30-pip stop-loss. The first account is set to 1:30, the second to 1:500. Here is everything that differs, and everything that does not.

One 0.10-lot EUR/USD trade on a $1,000 account at 1:30 and at 1:500 (illustrative price 1.0850).

Figure	Account at 1:30	Account at 1:500
Used margin	$361.67	$21.70
Free margin at open	$638.33	$978.30
Margin level at open	276.5%	4,608.3%
Pip value	$1	$1
Loss if the 30-pip stop is hit	$30 (3%)	$30 (3%)
Cost of a 1.0-pip spread	$1	$1
Effective leverage	10.85:1	10.85:1
Adverse pips to a 50% margin level with no stop (approximate; margin held constant)	About 820	About 990

Every figure that measures risk is identical. The 1:500 account has more free margin and a stop-out that is further away — both, if anything, in its favour. Our guide to how forex spreads work covers the cost rows in more detail; they are set by the spread and the lot size, never by leverage.

The difference between the two accounts appears only when the trader gets it wrong. The next table shows the largest EUR/USD position the same $1,000 can open at each leverage setting, and how far the market has to move to erase the balance entirely.

The largest EUR/USD position a $1,000 account can open at each leverage setting (illustrative price 1.0850), and the adverse move that would erase the balance.

Leverage	Largest position	Margin used	Pip value	Pips to lose $1,000
1:30	0.27 lot	$976.50	$2.70	370.4
1:100	0.92 lot	$998.20	$9.20	108.7
1:500	4.60 lots	$998.20	$46.00	21.7
1:1000	9.21 lots	$999.29	$92.10	10.9
1:2000	18.43 lots	$999.83	$184.30	5.4

A maximum-size position opens with a margin level barely above 100%, so the spread alone can take it into margin call before the price has moved at all. At 1:500 a 50% stop-out would close it about 11 pips after the open, with half the account gone; at 1:2000 a 5.4-pip move would erase the whole balance, and a 50% stop-out would fire after less than 3 pips. Nobody sensible opens those positions on purpose. They get opened after a string of losses, when the trader is trying to win it all back in one trade — the pattern our article on trading psychology describes. At 1:30 the account cannot open a position that large in the first place.

How to choose your leverage

Choose position size first and leverage last. The leverage setting only has to be high enough to let you open the positions your risk rules produce, with room to spare; anything above that is a ceiling you have removed for no benefit.

1. Fix your risk per trade as a percentage of equity — 1% is a common starting point, and our guide to the 2% rule sets out the case for a cap.
2. Set the stop-loss where the trade idea is proven wrong on the chart, not where it makes the numbers convenient.
3. Size the position: lots = risk in money ÷ (stop in pips × pip value per lot).
4. Work out the margin at your candidate leverage, for everything you might hold open at the same time.
5. Pick the lowest leverage setting that keeps that total margin comfortably below your equity, so that the margin level stays far above the stop-out on a normal losing streak.

Here is step 3 and step 4 worked through for a $1,000 account risking 1% ($10) on EUR/USD at 1.0850, across a range of stop distances.

Position size, effective leverage and margin for a 1% ($10) risk on a $1,000 account, EUR/USD at an illustrative 1.0850.

Stop distance	Position for 1% risk	Position value	Effective leverage	Margin at 1:30 (share of equity)	Margin at 1:500
5 pips	0.20 lot	$21,700	21.7:1	$723.33 (72.3%)	$43.40
10 pips	0.10 lot	$10,850	10.85:1	$361.67 (36.2%)	$21.70
20 pips	0.05 lot	$5,425	5.43:1	$180.83 (18.1%)	$10.85
25 pips	0.04 lot	$4,340	4.34:1	$144.67 (14.5%)	$8.68
50 pips	0.02 lot	$2,170	2.17:1	$72.33 (7.2%)	$4.34
100 pips	0.01 lot	$1,085	1.09:1	$36.17 (3.6%)	$2.17

The percentages in the fifth column do not depend on the account size: a trader risking 1% with a 25-pip stop on EUR/USD ties up about 14.5% of equity in margin at 1:30, whether the account holds $1,000 or $100,000. Three conclusions follow from the table.

For most swing and day trading, 1:30 is enough

With stops of 20 pips or wider, a 1%-risk trade on EUR/USD at this price uses no more than about a fifth of the account's equity as margin, even at the EU and UK retail cap. Two or three such positions open at once still fit. If you are offered 1:500 and trade this way, the extra leverage buys you nothing except the ability to break your own rules.

Tight stops are where more leverage genuinely helps

A scalper with a 5-pip stop needs 72% of equity as margin for a single 1%-risk trade at 1:30, which leaves almost no room for a second position or for the margin level to absorb a loss. For that style, a setting of 1:100 or 1:200 is a reasonable choice: it frees margin without changing the risk of each trade. Pairs and times of day with wider spreads make a 5-pip stop impractical anyway — see our guide to when spreads are tightest.

Very small accounts hit a different limit

On a $100 account, 1% is $1. With a 20-pip stop that calls for a pip value of $0.05 — half a micro lot, below the usual 0.01-lot minimum. The constraint there is the minimum lot size, not leverage, and raising leverage does not solve it: it only makes positions like 0.10 lot possible, one that turns an ordinary 20-pip loss into 20% of the account. Cent accounts, which our data lists at Exness, HFM and Vantage, exist for this problem; check the contract size before you trade one. Consider, too, what 1:1000 does on a $50 account: 0.10 lot of EUR/USD needs just $10.85 of margin, and at a 50% stop-out level the position would be closed after about 45 pips, with nearly $45 of the $50 gone.

A workable rule of thumb, and ours rather than a regulator's: keep the combined effective leverage of everything you hold open in single digits, and set the account's leverage to the lowest value that lets you do so without the margin level ever approaching the broker's margin call. Many brokers let you choose a lower leverage setting at sign-up or change it later from the client area; if yours does, use it.

Frequently asked questions