Understanding Leverage and Margin
Leverage and margin are fundamental concepts in forex trading that allow you to control larger positions with less capital. Understanding how they work is crucial for managing risk effectively.
What is Leverage?
Leverage is the ratio between the trader's capital and the size of the broker's credit. For example, 1:100 leverage means you can control $100,000 with just $1,000 of your own capital.
ComoFX Leverage Options
Standard Account: Up to 1:500
ECN Account: Up to 1:400
Pro Account: Up to 1:300
Higher leverage = Lower margin required = Higher risk
What is Margin?
Margin is the amount of money required in your account to open and maintain a trading position. It's essentially a good faith deposit that allows you to access leverage.
Key Margin Concepts
- Required Margin: Amount needed to open a position
- Used Margin: Total margin locked in open positions
- Free Margin: Available funds for new positions (Equity - Used Margin)
- Margin Level: (Equity / Used Margin) × 100%
Leverage Calculation Example
Example: Trading 1 lot of EUR/USD
• Position size: 100,000 EUR
• Leverage: 1:100
• Required margin: 100,000 ÷ 100 = $1,000
• With 1:500 leverage: 100,000 ÷ 500 = $200
Margin Call and Stop Out
ComoFX protects both you and the broker from negative balances with two safety mechanisms:
Margin Call (100%)
When your margin level drops to 100%, you receive a warning. You cannot open new positions but existing ones remain open. This is a signal to deposit more funds or close positions.
Stop Out (50%)
When margin level drops to 50%, the platform automatically closes your positions (starting with the most losing one) until margin level is restored above 50%.
Risk Management with Leverage
- Start low: Begin with lower leverage (1:50 or 1:100) until experienced
- Use stop losses: Always set stop loss orders to limit potential losses
- Position sizing: Never risk more than 1-2% of capital per trade
- Monitor margin level: Keep it above 200% for safety
- Avoid overtrading: Don't use all available leverage
Leverage Example Scenarios
✅ Conservative Approach
Account: $5,000 | Leverage: 1:100 | Position: 0.1 lot ($10,000)
Required margin: $100 | Margin level: 5000%
Risk: Low - Well protected from margin calls
⚠️ Aggressive Approach
Account: $5,000 | Leverage: 1:500 | Position: 2 lots ($200,000)
Required margin: $400 | Margin level: 1250%
Risk: High - Small market moves can trigger margin call
How to Change Your Leverage
- Login to ComoFX client portal
- Navigate to "My Accounts"
- Select the account you want to modify
- Click "Change Leverage"
- Choose your desired leverage ratio
- Confirm the change (effective immediately)
⚠️ Important:Leverage magnifies both profits and losses. While it allows you to control larger positions, it also increases risk. Never trade with leverage you don't fully understand.
Questions About Leverage?
Our trading support team can explain leverage for your specific strategy