Leverage and margin explained, with examples
What a leverage ratio really means, how margin is calculated, and how to keep leverage from working against you.
Bilal Hatab6 min read
Leverage lets you control a large position with a smaller amount of money. The money you put down is the margin. Together they decide how much a price move affects your account.
What 1:200 means
Leverage of 1:200 means every 1 US dollar of margin controls up to 200 US dollars of position. BBCorp offers leverage up to 1:200 on forex, metals, energies and indices, and up to 1:20 on crypto CFDs.
How margin is calculated
Margin is the position’s value divided by the leverage.
- A 100,000 US dollar EUR/USD position at 1:200 needs 500 US dollars of margin.
- A 20,000 US dollar gold position at 1:200 needs 100 US dollars of margin.
- A 10,000 US dollar crypto CFD position at 1:20 needs 500 US dollars of margin.
Why leverage cuts both ways
Leverage changes how much margin is locked, not how much each price move is worth. On a 100,000 US dollar EUR/USD position, a move of 0.0050 is worth 500 US dollars whether you used 1:50 or 1:200. With higher leverage that same move is a bigger share of the money in your account, so losses can eat into your balance much faster.
Free margin and margin calls
Free margin is the money in your account that is not locked in open positions. If losses shrink it too far, MetaTrader 5 warns you with a margin call, and positions can be closed automatically to stop further losses. The levels for your account are shown in the client portal and on Account types.
How to use leverage carefully
- Size each position from your stop loss: decide how much you are willing to lose first.
- Keep plenty of free margin, especially before big news.
- Avoid opening many positions that all depend on the same move.
- Practise on a demo account until margin feels familiar.