What Is Leverage in Forex? Formula and Real Numbers
Leverage is the ratio between the size of a position and the capital required to hold it. A broker offering 1:100 lets you control $100,000 of currency with $1,000 of your own money set aside as margin. It is a borrowing facility, not a strategy: it changes how much capital a trade ties up, and nothing else about the trade.
How it works
Margin is the deposit the broker freezes while a position is open. The arithmetic is short.
Position value = Contract size × Lots × Price
Required margin = Position value ÷ Leverage
Effective leverage = Total open position value ÷ Account equity
One standard lot of EUR/USD is 100,000 units. At 1.0850 the position is worth $108,500.
| Account leverage | Margin frozen | Cost of a 50-pip adverse move |
|---|---|---|
| 1:30 | $3,616.67 | $500 |
| 1:100 | $1,085.00 | $500 |
| 1:500 | $217.00 | $500 |
The position is identical in all three rows. Leverage moved the margin, never the risk.
The number that actually describes exposure is effective leverage: the notional value of everything open divided by equity. A trader on a 1:500 account running 0.05 lots on $10,000 sits at 0.54:1 — less exposed than someone who paid cash for the same currency. A trader on a 1:30 account running 2.5 lots on the same $10,000 sits at 27:1, pressed against the ceiling the regulator set. The tier says nothing about either of them; the position size says everything.
Run it on your own instrument with the leverage calculator and the margin calculator.
Why it matters
High leverage does not lose money. It removes the constraint that used to stop you.
On a 1:30 account, $10,000 of equity caps you at about 2.7 standard lots of EUR/USD before margin runs out — the broker enforces a position-size ceiling on your behalf. On 1:500 the same $10,000 supports 46 lots. Nothing improved; a ceiling was removed.
The chain that empties accounts is always the same. Leverage permits a large position, the large position produces a loss too big to sit through, and the resulting drawdown demands a return arithmetic will not supply — a 50% loss needs a 100% gain to get back to flat. Leverage is where the chain starts, but the link that does the damage is size, which is why position sizing is the control worth having and the margin call is the symptom rather than the cause.
What the data shows
The 10,000+ accounts connected to ShowMyTrades (August 2026) sit across 703 distinct broker servers, on MT4, MT5, cTrader and TradeLocker. Effectively every leverage tier on the market is represented somewhere in that set, from a regulated 1:30 cap to offshore 1:500 and beyond.
The outcomes do not sort by tier. Across the public accounts with trading history, the median deepest drawdown is 9.7% — but 38.5% of them never went more than 5% underwater, while 38.2% gave back more than a fifth of their peak and 17.6% more than half of it.
Two groups of almost identical size, drawn from the same pool of leverage settings, ending an order of magnitude apart. What separates them is not what the broker permitted. These figures describe accounts published on ShowMyTrades, not traders in general, and within that population the variable that moved was size.
Where you see it on ShowMyTrades
The leverage the broker granted appears as a badge in the account page header, next to the broker name and the account currency. It is read from the terminal, not typed in by the owner.
What the trader did with it shows up elsewhere. Total Lots in the advanced statistics is the cumulative volume actually traded. Drawdown and DD on Balance in the account stats panel show what that volume cost at the worst moment — the first on equity including open positions, the second on closed balance only. The Equity Curve in the charts viewer plots Balance and Equity together, and the gap between the two lines is where an oversized open position hides until it is closed.
Common misunderstandings
- "1:500 is riskier than 1:30." The account setting is not risk. Two accounts holding identical positions carry identical risk whatever the broker permits. Higher leverage only widens the range of sizes you are allowed to choose badly from.
- "More leverage means more profit." It means less capital tied up as margin. Profit and loss are set by position size and price movement, both unchanged by the tier.
- "Free margin is spare buying power." Free margin is the distance between you and a stop out. Spending it is how a manageable loss becomes a liquidation.
- "My broker caps me at 1:30, so I am safe." A regulatory cap limits maximum total size, not the risk on any single trade. An account can still be lost on one badly sized position well inside a 1:30 limit.
Every number above has a calculator behind it — see the guide to forex calculators for how they fit together.
Related terms
Margin Call
A margin call is the broker's warning that your equity no longer covers your open positions. The margin level formula, the stop-out sequence, and real data.
Maximum Drawdown
Maximum drawdown is the deepest peak-to-trough fall an account ever recorded. The formula, the recovery table, and the real spread across thousands of accounts.
Position Sizing
Position sizing turns a risk percentage into a lot size using your stop distance and pip value. The formula, the three common methods, and what bad sizing costs.