How does leverage affect my margin and risk?
Higher leverage generally reduces the margin required for the same position size and more free margin available. It does not directly change your profit or loss on that position. However, using higher leverage to open larger positions increases your exposure to price movements and can increase the risk of a margin call or stop-out.
What does a leverage ratio mean?
A leverage ratio shows the position value you can control relative to the margin required.
- 1:100 leverage: Requires approximately 1 unit of margin for every 100 units of position value.
- 1:500 leverage: Requires approximately 1 unit of margin for every 500 units of position value.
The applicable leverage depends on the product and your account’s trading conditions.
How does leverage change my required margin?
For a position calculated using leveraged notional value:
Required margin = Position value ÷ Applicable leverage
Example: The same trade at different leverage levels
Suppose you buy 1 standard lot of EUR/USD, representing 100,000 EUR, at 1.1000. The position value is USD 110,000, and your account currency is USD.
| Applicable Leverage | Calculation | Required Margin |
| 1:100 | USD 110,000 ÷ 100 | USD 1,100 |
| 1:500 | USD 110,000 ÷ 500 | USD 220 |
At 1:500, the same trade requires USD 880 less margin. The position size and profit or loss per pip remain unchanged.
*These figures assume no additional product-specific margin requirements apply.
Does higher leverage increase my profit or loss?
Not when the position size and price movement remain the same. Profit or loss depends on the size of the position and the market movement, rather than the margin required.
Using the same 1 lot EUR/USD position:
- Price rises by 50 pips: The trading profit is USD 500 at either leverage level.
- Price falls by 50 pips: The trading loss is USD 500 at either leverage level.
These amounts exclude spreads, commissions, swap and other applicable charges.
Why can higher leverage increase risk?
Higher leverage allows you to open a larger position using the same amount of margin. The larger position, not the leverage setting alone, creates greater exposure to price movements.
Example: Larger positions using the same margin
Assume EUR/USD is 1.1000 and your account currency is USD:
Applicable Leverage | Position Size | Required Margin | Loss from a 20-Pip Adverse Move |
1:100 | 0.10 lots | USD 110 | USD 20 |
1:500 | 0.50 lots | USD 110 | USD 100 |
Both positions require the same margin, but the larger position loses five times as much from the same price movement, before other charges.
Can a leverage change affect existing positions?
Where a leverage change applies to existing positions, their margin requirements may be recalculated.
- Lower leverage: Generally increases used margin and reduces free margin.
- Higher leverage: Generally reduces used margin and increases free margin.
- Position size: A leverage change does not itself resize or close the position.
- Margin level: An increase in required margin can reduce your margin level and may lead to a margin call or stop-out.
The effect depends on the type of adjustment. PU Prime’s dynamic leverage applies to new positions in affected products during designated periods; existing positions are not affected by that adjustment.
What should I check before using higher leverage?
- Applicable leverage: Confirm the limit for the product you intend to trade.
- Position size: Consider the monetary gain or loss from a given price movement.
- Free margin: Maintain sufficient funds rather than using all available margin.
- Adjustment conditions: Check whether an equity-based or temporary leverage limit applies.
Lower required margin does not mean a trade carries less market risk.
