Leverage allows you to control a larger position with a smaller amount of capital. It is expressed as a ratio — for example, 1:500 means $1 of your capital controls $500 in the market. While leverage amplifies potential profits, it equally amplifies potential losses. The amount of leverage available depends on the broker, account type, and instrument.
With 1:500 leverage and $200 in your account, you can open a position worth up to $100,000 (1 standard lot of EUR/USD). A 0.5% move in your favor earns $500, but a 0.5% move against you loses $500.
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