Leverage lets a small deposit control a large position. It is the single most misunderstood tool in trading — powerful, and unforgiving when misused.
HOW LEVERAGE WORKS: At 1:100 leverage, $1,000 of margin controls $100,000 of notional exposure. A 1% move is a 100% move on your margin — in either direction.
MARGIN AND THE STOP-OUT: Used margin is locked while a position is open; free margin absorbs adverse moves. When equity falls below the maintenance level, positions are closed automatically to protect the account.
USING LEVERAGE RESPONSIBLY: High leverage does not mean you must use it. Most professional traders use far less than the maximum available. Choose leverage that keeps your meaningful stop loss from triggering a margin call.
