Leverage & margin

Separates the leverage your broker offers from the leverage you actually carry. Use it before sizing up, or when a position feels too big.

Leverage offered and leverage used are two different things and confusing them is expensive. A broker offering thirty times leverage is describing a ceiling, not an instruction. Effective leverage is the one that matters: the notional value of your position divided by your capital. If you hold a position worth twice your account, you are at two times effective leverage regardless of whether the broker would have allowed thirty.

Notional exposure is the full market value of what you control, size multiplied by entry price. Margin required is the slice of your capital the broker sets aside to let you hold it. High leverage makes the margin small, which is exactly why it is seductive. A small margin frees capital for more positions, and several positions each with a small margin can quietly add up to an exposure that no single one of them would have looked like.

Margin wiped by is a warning line, not a liquidation price. It is the size of adverse move that would consume the posted margin entirely. At ten times leverage that is a ten percent move. At fifty times it is two percent, which many instruments cover in an ordinary session. Real liquidation happens earlier, because venues close positions when equity falls to a maintenance level rather than to zero, and that level differs by broker and by instrument.

The practical guidance is to size from your stop first and then check leverage second. If position sizing gives you a size, and this card then reports an effective leverage you are not comfortable with, the constraint that binds is exposure rather than stop distance. That usually means the instrument is too large for the account, and the right response is a smaller instrument or a smaller contract, not a tighter stop.