Leverage

### Leverage is a collateral setting, not a risk setting Keep this sentence. Leverage decides how much of your money the broker locks up as margin. It does not decide how much you lose per point of adverse movement. **Position size does that.** A trader on 1:30 and a trader on 1:500 who open the same size have the same loss on the same move. The 1:500 account just has more idle cash and more rope before the broker intervenes. Beginners invert this. They read a big ratio as a big opportunity, size to the margin available instead of to the loss they can survive, and then find out the ratio only ever mattered on the way down. ### What regulators actually cap, and what that tells you - ESMA's product intervention measures, applying to retail CFDs from 1 August 2018, set leverage at 30:1 for major currency pairs, 20:1 for non-major pairs, gold and major equity indices, 10:1 for other commodities and non-major indices, 5:1 for individual equities, and 2:1 for cryptocurrencies. [ESMA's own announcement](https://www.esma.europa.eu/press-news/esma-news/esma-adopts-final-product-intervention-measures-cfds-and-binary-options) sets it out. - The same package added a margin close-out rule at 50% of minimum required margin, and negative balance protection per account. - The FCA made equivalent restrictions permanent for UK retail clients from 1 August 2019: leverage between 30:1 and 2:1, close-out when funds fall to 50% of the margin needed to maintain open positions, negative balance protection, and a standardised risk warning stating the percentage of that firm's retail accounts that make losses. - In the US, NFA Financial Requirements Section 12 requires a security deposit of 2% of notional for the major currencies (British pound, Swiss franc, Canadian dollar, Japanese yen, euro, Australian dollar, New Zealand dollar, Swedish krona, Norwegian krone, Danish krone) and 5% for everything else. That is 50:1 and 20:1, written as collateral rather than as a ratio. Notice the pattern. The more volatile the underlying, the less leverage retail gets. Volatility sets the cap, not ambition. ### Same force, different plumbing, in stocks US equity margin is leverage too, just quieter. Regulation T lets a broker lend up to 50% of the purchase price, so 2:1, and FINRA requires maintenance equity of at least 25% of market value. The SEC's margin bulletin works the example: buy at $50 with $25 of your own money and $25 borrowed, and a fall to $15 costs you more than 100% of your $25 and still leaves you owing the broker $10, plus interest. The same bulletin warns that your broker may be able to sell your securities at any time without consulting you first. The day-trading plumbing is changing, so older explanations are going stale. FINRA's [new intraday margin requirements](https://www.finra.org/investors/insights/intraday-margin-requirements) became effective on 4 June 2026. They retire the pattern day trader designation and its $25,000 minimum equity requirement in favour of monitoring account equity intraday against open positions, and $2,000 remains the minimum equity required to trade on leverage. Read that with care: firms have a permitted transition period through 20 October 2027, so the old $25,000 threshold may still be exactly what your broker applies to you today. Check the rules of the account you actually hold rather than the rules of the headline. ### The part that actually ends accounts Leverage sets the distance between you and the close-out. Under ESMA and FCA rules, positions get closed for you at 50% of required margin. So the more of your equity is committed as margin, the smaller the move needed to take the decision out of your hands. Gains and losses are magnified symmetrically, as the definition says. The close-out is not symmetric. You can be flushed out at the worst price available and be proved right about direction ten minutes later, with no position left to show for it.