"Leverage" is one of the first words you'll run into once you start reading about trading — and one of the most misunderstood. Used carefully, it's a tool. Used carelessly, it's how accounts get wiped out fast. Here's the plain-language version.
What leverage actually is
Leverage lets you control a larger position in the market than your own deposit would normally allow — the broker extends the additional exposure, scaled to your own money. It's expressed as a ratio — 10x, 20x, and so on — describing how much bigger your effective trading size is compared to your deposit.
A simple example
Say you deposit $1,000 and use 10x leverage. Your account can now open positions worth up to $10,000. If the market moves 1% in your favor, you don't earn 1% of your $1,000 — you earn 1% of $10,000, or $100. That's a 10% return on your actual deposit.
The same math applies in reverse. A 1% move against you is a $100 loss — 10% of your deposit, from a 1% market move.
To see why the ratio itself matters, compare two accounts with the same $1,000 deposit and the same 1% market move — one at 5x leverage, one at 20x. The 5x account moves by $50 (5% of the deposit); the 20x account moves by $200 (20% of the deposit) — four times the swing, for an identical move in the underlying market.
Common leverage ratios and what they mean
Leverage limits vary a lot depending on where a broker is regulated and what's being traded. Retail forex accounts regulated in the EU and UK are typically capped around 1:30 for major currency pairs, with lower caps for more volatile assets like individual stocks or cryptocurrencies. Brokers regulated in other jurisdictions sometimes offer much higher ratios — occasionally 1:500 or beyond — aimed at traders who understand the risk trade-off involved. Higher available leverage isn't an instruction to use all of it: many experienced traders use only a fraction of the maximum leverage on offer, treating the rest as headroom rather than a target.
Why it cuts both ways
This is the part that's easy to skim past: leverage doesn't change how much the market moves. It changes how much that movement is worth to your account. Higher leverage means smaller market moves can produce larger swings in your balance — in both directions.
Most brokers also guarantee you can't lose more than your deposit — the account simply gets closed out before your balance goes negative. With the Amplify strategy specifically, this works through a defined maximum drawdown limit set on the account via Tag Markets: the strategy is designed to stop and close out before losses reach that threshold, so in practice the most you can lose is the amount you've deposited — not more. That said, losing the full deposit is still a real possibility at higher leverage if risk isn't managed, regardless of the safeguards in place.
Margin, drawdown, and stop-outs
A few terms worth knowing: margin is the portion of your deposit being used to keep a leveraged position open. Drawdown is how far your account balance has dropped from its peak, usually shown as a percentage. Many accounts have a maximum drawdown limit — if losses reach that threshold, the account is automatically closed to prevent further loss. Understanding what limit applies to any leveraged account before you use it is one of the simplest ways to know your actual worst-case scenario upfront.
The bottom line
Leverage is neither good nor bad on its own — it's a multiplier applied to whatever is already happening in the market. Higher leverage means higher potential reward and higher potential risk, in equal measure. Know the maximum drawdown limit, know what you're comfortable losing, and size your leverage accordingly.
Frequently asked questions
What leverage should a beginner use?
There's no single right answer, but a common approach is to start well below the maximum available and increase it gradually as you understand how a given strategy behaves through both winning and losing periods. Many experienced traders treat high available leverage as headroom, not a target to max out.
Does leverage cost money?
Leverage itself isn't a separate fee, but the position you're able to open is bigger — so overnight financing costs (sometimes called swap or rollover fees), where applicable, are calculated on that larger position size, not just your deposit. Check your broker's specific fee schedule for any position held open overnight.
What happens if my account goes to zero?
Most regulated brokers close leveraged positions automatically before your balance can go negative, often called a stop-out. Depending on the broker and jurisdiction, negative balance protection may also apply, meaning you can't owe more than you deposited. Rules differ by broker, so confirm exactly how this works before you fund an account.