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The Connection between MARGIN and LEVERAGE

Before continuing, it is important to understand the concept of leverage. Leverage and margin are closely related because the more margin that is required, the less leverage traders will be able to use. This is because the trader will have to fund more of the trade with his own money and therefore, is able to borrow less from the broker.

Leverage has the potential to produce large profits and a large loss which is why it is crucial that traders use leverage responsibly. Take note that leverage can vary between brokers and will differ across different jurisdictions – in line with regulatory requirements. Typical margin requirements and the corresponding leverage are produced below:

MARGIN REQUIRED MAXIMUM LEVERAGE
50% 2:1
3.33% 30:1
2.00% 50:1
0.5% 200:1

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