Glossary
Leverage
Leverage lets a trader open a position larger than the margin set aside for it, expressed as a ratio such as 1:100.
What it means
At 1:100, every $1 of margin controls $100 of position. Leverage does not change how much a trade gains or loses per pip. It changes how much margin the trade ties up, and so how large a position the account can open.
Prop firms set leverage by instrument. Forex usually gets the highest ratio, with lower ratios on indices, metals and crypto. Some firms lower leverage on funded accounts or let traders choose it when they buy a challenge.
High leverage makes it easy to open a position far larger than the daily loss limit can absorb. The loss limits, not the leverage, decide how much a trader can lose before the account breaches.
Worked example
One standard lot of EUR/USD at a price of 1.1000 is a position worth $110,000. At 1:100, it needs $1,100 of margin. At 1:30, it needs about $3,667.
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