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🔢 Trading basics · Beginner · 8 min read · Lesson 9 of 42 · Free with an account

Leverage and margin explained: how 1:100 really works (and how it can hurt you)

Leverage lets you control a trade much larger than the money in your account. With 1:100 leverage, $100 of margin controls a $10,000 position. It makes small accounts usable, and it is also the main reason beginners lose money fast.

By the Africa.Forex Academy · Updated

Margin: the deposit to open a trade

Margin = trade value ÷ leverage. It is not a fee; it is money your broker sets aside while the trade is open.

0.10 lots of EUR/USD at 1:100
  • Trade value: 10,000 € × 1.0850 = $10,850.
  • Margin: $10,850 ÷ 100 = $108.50.
  • Check it with the margin calculator.
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Questions people ask

Is 1:500 leverage bad?

Not by itself, but it allows dangerously large positions. Traders who size by risk rarely need more than a small part of it.

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Educational content only, not financial, investment or tax advice. Trading forex and CFDs carries a high risk of losing money. Look up any term in the trading glossary.