2026-01-05•Andreas
The Truth About Leverage (and Why It Kills Beginners)
Leverage is a double-edged sword. Learn how to use it as a tool, not a weapon of mass destruction.
The Silent Killer
Brokers will offer you 1:500 or even 1:1000 leverage. They sell it as "buying power." It is actually "losing power."
What is Leverage?
It is borrowed capital. With 1:100 leverage, $100 controls $10,000.
- Upside: If price moves 1% in your favor, you make 100%.
- Downside: If price moves 1% against you, you lose 100% of your account.
The Trap
Beginners see the upside. Pros respect the downside. If you use high leverage without a strict Stop Loss, a single candle spike can wipe you out.
Proper Use
Leverage is useful IF you calculate risk based on cash, not margin.
- Risk 1% of your account ($100 on a $10k account).
- Adjust lot size to match that $100 risk.
- The leverage ratio determines how much margin is used, but the risk stays constant.
Never trade without a position size calculator.