What leverage actually does

With 1:500 leverage, every dollar in your account controls 500 dollars of exposure: one lot of EUR/USD (100,000 EUR) requires only a fraction of its value as collateral. That reduces the capital needed to open the position — but profits and losses are calculated on the full exposure, not on the collateral.

The practical consequence: with the same account, a leveraged position amplifies every pip in your favour and every pip against you in identical proportion. Leverage does not change the odds; it changes the speed.

Margin, free margin and margin level

  • Used margin: the collateral locked by your open positions.
  • Free margin: your equity minus used margin — the «fuel» available for new positions or to absorb floating losses.
  • Margin level: equity ÷ used margin, as a percentage. This is the number the platform watches: when it falls below the defined thresholds, you first receive a margin call and, if it keeps falling, stop-out kicks in.

Stop-out: what happens when margin runs dry

If the margin level falls below the stop-out threshold, the platform starts closing positions automatically — beginning with the largest loser — until the level recovers. It is not a punishment: it is the mechanism that keeps your account from going negative. The exact thresholds per account type are documented in the Execution Policy.

Important: in gap conditions (weekend opens, high-impact news), the close can execute at a worse price than the theoretical threshold. Stop-out limits the disaster; it does not make it impossible.

Position sizing: the one variable fully under your control

The rule most consistent traders use is risking 1% to 2% of the account per trade — defining risk by the distance to the stop-loss, not by the margin the position requires. With that approach, a streak of five consecutive losses (which happens to every strategy) costs 5-10% of the account, not the whole account.

The practical formula: volume = (capital × risk %) ÷ (stop distance in pips × pip value). Any position calculator solves it in seconds; doing it before every trade is what takes discipline.

The mistakes that burn the most accounts

  • Confusing «available margin» with «acceptable risk»: being able to open the position does not mean you should.
  • Trading without a stop-loss «because the market will come back». Sometimes it does not.
  • Averaging down with more leverage to «recover faster».
  • Holding large positions through high-impact news without considering the possible gap.
  • Measuring success by one good week instead of months of consistency.