How leverage and margin work

In short

Leverage lets you open a position larger than your money. Margin is the part of your own capital held as a deposit. It is not a fee and it is returned when the trade closes.

leverage is shown as a ratio, such as 1:500. It tells you how much your buying power is multiplied: for every 1 US dollar of your capital, the ratio determines the total market value you can control.

Ratio	What it means	Example
1:50	For every 1 dollar, you control 50	A 5,000 dollar position with 100 dollars of your money
1:500	For every 1 dollar, you control 500	A 5,000 dollar position with 10 dollars of your money
1:2000	For every 1 dollar, you control 2,000	A 20,000 dollar position with 10 dollars of your money

With 1,000 US dollars at 1:100, your total trading power is 100,000 US dollars.

Margin is the deposit

margin is the money held in your account to open a leveraged trade. It is not a fee or a cost. It is a portion of your own capital, temporarily held, and released when the position closes. The higher your leverage, the smaller the deposit needed.

Margin = total trade value ÷ leverage

Leverage	Margin required
1:50	2% of the trade value
1:100	1% of the trade value
1:500	0.2% of the trade value

A 10,000 US dollar trade at 1:100 needs 100 US dollars of margin. A 20,000 US dollar trade at 1:500 needs 40 US dollars.

What happens when margin runs low

If your open trades lose money, your equity falls. If it gets too low to secure your positions, the platform sends a margin call warning, and if losses continue it begins closing trades at the stop out. See Margin call and stop out.

Two leverage models

Leverage is not always one fixed ratio. Tradin uses two models depending on the instrument.

Model	How it behaves
Static	One fixed ratio applies to your entire position. Margin scales in a straight line with size, so on an instrument at 1:100 a 10,000 dollar position needs 100 of margin and a 100,000 dollar position needs 1,000
Dynamic	Leverage falls in tiers as your exposure on an instrument grows, so the first portion gets the highest leverage and larger portions get progressively less. See Dynamic leverage

Both models are still subject to the reductions applied before weekends, holidays and major news. See When leverage is reduced.

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How leverage and margin work

Margin is the deposit

What happens when margin runs low

Two leverage models

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