Leverage in Forex: what it really changes
In Forex, you can open positions far larger than the money you deposit. That is leverage. It explains why an account can gain a lot in a short time, and why it can also lose everything. This guide explains it in plain words, with a worked example.
How it works
With leverage of 20, a deposit of €1,000 lets you open positions worth up to €20,000. The broker does not lend you this money in the usual sense: it sets aside part of the deposit, the margin, as collateral for the open positions.
Gains and losses are calculated on the size of the position, not on the deposit. That is where everything is decided.
A worked example
An account of €1,000 opens a position of €10,000. The leverage actually used is therefore 10.
| The price moves by… | Effect on the position | Effect on the account |
|---|---|---|
| +1% | +€100 | +10% |
| −1% | −€100 | −10% |
| −5% | −€500 | −50% |
| −10% | −€1,000 | −100%: the account is empty |
A 10% price move, which is still common over a year for a currency pair, is enough to wipe out the account. Without leverage, the same move would have cost 10%.
Leverage offered and leverage used
Two things need to be kept apart:
- The leverage offered by the broker (for example 30:1 or 500:1): this is a maximum. It says how far you can go, not what you actually do.
- The leverage actually used: the total size of the open positions divided by the value of the account. This is what determines how a price change affects the account.
High leverage on offer is not dangerous in itself if positions stay small. But it allows very large positions to be opened, and so very fast losses.
The caps in Europe
For retail clients, brokers regulated in the European Union must limit leverage: 30:1 on major pairs (such as EURUSD) and 20:1 on the others, including AUDCAD and NZDCAD. They must also close positions when the available margin falls to half of the required margin, and ensure that you cannot lose more than your deposit.
Leverage and margin: what happens in a drawdown
When positions are losing, the available margin shrinks. If it falls too low, the broker closes positions itself, often starting with the biggest losers. This closure comes at the worst moment: the loss, until then floating, becomes real, even if the price comes back afterwards.
This matters especially for grid strategies, whose basket grows during a decline (see our guide on grid and martingale).
What to remember before copying a strategy
- Look at the worst floating drawdown rather than the return: it shows what leverage has already put the account through. See our guide on floating drawdown.
- Only invest an amount whose total loss would not change your life. With leverage, a total loss is possible.
- Keep a global stop loss as a last safety net, not as a tight setting. See our guide on the global stop loss.
And at PlanetFinance?
The PlanetFinance strategy trades AUDCAD and NZDCAD on a Vantage account with leverage of 1:500. This figure is a maximum: it sets the margin each position locks up, not the size of the positions.
When copying, with the Equity Ratio mode recommended on the Configuration page, the size of your positions depends on your capital relative to the strategy's, not on your leverage. Your leverage does, however, set the margin those positions lock up: with lower leverage than the strategy, the same position locks up more margin, and your account can reach the forced-closure threshold in a drawdown that the strategy's account withstands. A Vantage copy account is set to 1:500 by default: keep this value (see the question on leverage).
Most of the time, the open positions are worth 2 to 3 times the value of the account. At the peak of a basket, they have exceeded 60 times, in April 2025 as in 2026. That is why the strategy needs high leverage, and why margin matters so much.
The estimated worst floating drawdown, about 75% in April 2025, shows what this leverage can put the account through; position sizes have been reduced since. The strategy is adapted to market conditions. A loss of all the capital invested remains possible.
Further reading
- Grid and martingale in Forex: how they work and what the risks are
- Floating drawdown: why it matters more than returns
- The glossary: leverage, margin, lot, in plain words.
This guide is for information only. It does not constitute investment advice. Past performance is not a reliable indicator of future performance. Trading Forex with leverage carries a high risk of capital loss.