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Understand Leverage and Margin - Trade Smarter

Leverage and margin are two of the most fundamental concepts in CFD trading. Understanding how they work - and how they interact - is essential to managing your risk and making informed trading decisions.

Leverage and margin trading symbols
Open Live AccountDownload Leverage & Margin Calculation Sheet

What is Margin in Trading?

Margin is the amount of capital required to open and maintain a leveraged trading position. It is not a fee or a cost - it is a deposit held by your broker as collateral while your trade is open. Once you close your position, it is released back to your account, subject to any realized profit or loss.

Margin is expressed as a percentage of the full position value. The margin percentage is directly linked to your leverage ratio - the higher your leverage, the lower the margin requirement, and vice versa.

Example:

You want to open a 1 lot (100,000 units) position on GBP/USD, currently priced at 1.2700. Full position value: 100,000 × 1.2700 = $127,000 With 1:500 leverage (0.2% margin requirement): Margin required = $127,000 × 0.2% = $254 With 1:100 leverage (1% margin requirement): Margin required = $127,000 × 1% = $1,270 With 1:50 leverage (2% margin requirement): Margin required = $127,000 × 2% = $2,540

The higher your leverage, the less margin capital you need to control the same position size.

What is Leverage in Trading?

Leverage allows you to control a larger position in the market using a smaller amount of your own capital. It is expressed as a ratio - for example, 1:100 - meaning that for every $1 of your own funds, you can control $100 of market exposure.

Leverage amplifies both your potential profits and your potential losses. A small price movement in your favor generates a proportionally larger return on your deposited capital - but equally, a small movement against you generates a proportionally larger loss.

Example:

  • You want to open a position on EUR/USD with a trade size of $10,000.

  • Without leverage: You would need $10,000 of your own capital to open this position.

  • With 1:100 leverage: You only need $100 of your own capital (1% of $10,000) to control the same $10,000 position.

Leverage & Margin Calculation Sheet

Download Our Free Leverage & Margin Calculation Reference

Our Leverage & Margin Calculation Sheet is a ready-to-use reference guide that covers margin requirement formulas, worked examples across all asset classes, and a quick-reference table of margin rates by instrument and leverage level.

Download Leverage & Margin Calculation Sheet

Fixed and Floating Leverage

MH Markets Financial Services offers two leverage models - Fixed Leverage and Floating Leverage. Understanding the difference helps you choose the model that best suits your trading style and risk management approach.

Fixed Leverage

Fixed leverage gives you a consistent, pre-selected leverage ratio that remains constant regardless of your account’s equity or open position size. Clients can select a fixed leverage ratio of up to 1:500 for their account directly via the CRM portal, providing stable and transparent margin requirements under normal market conditions

  • Select your preferred leverage ratio - up to 1:500 - directly through your CRM portal
  • Your chosen leverage ratio remains constant regardless of account equity or position size
  • Stable margin requirements that are easy to calculate and plan around
  • Suitable for traders who prefer consistent margin requirements and fixed leverage conditions
  • Can be adjusted at any time through the CRM portal, subject to open positions

Floating Leverage

Floating leverage is a dynamic model where your effective leverage ratio adjusts automatically based on your real-time account equity. As your equity increases, your available leverage may decrease - and as equity decreases, leverage adjusts accordingly. This tiered structure is designed to balance trading flexibility with responsible risk management.

  • Leverage ratio adjusts automatically based on your real-time account equity
  • Higher equity levels may result in lower maximum leverage depending on account equity levels, which can affect margin requirements
  • No manual adjustment required - the system manages the ratio dynamically
  • Designed to promote responsible leverage use as account size grows
  • Full details of the tiered floating leverage structure are available in our official announcement
View Full Floating Leverage Tier Structure

Margin Requirement Calculation Formula

Margin Required = (Trade Size × Contract Size × Market Price) ÷ Leverage

Frequently Asked Questions

MH Markets Financial Services offers maximum leverage that may be up to 1:2000 on major forex pairs, subject to account type, client classification, regulatory requirements, and internal risk management policies. Leverage limits vary by asset class, with lower levels applied to CFDs on indices, stocks, and commodities.

Yes. Clients can select or change their fixed leverage ratio - up to 1:500 - directly through the MH Markets Financial Services CRM portal. Changes to leverage may not be possible while positions are open. For floating leverage adjustments, please contact our support team.

Fixed leverage gives you a constant, pre-selected leverage ratio that does not change regardless of your account equity. Floating leverage adjusts dynamically based on your real-time account equity - as your equity grows, the applicable leverage ratio may decrease in line with our tiered structure. Fixed leverage offers predictability; floating leverage offers dynamic risk management built in.

If your account equity falls to the margin call level, you will receive a margin call notification. If your equity continues to fall to the stop out level, your positions will be automatically closed to protect your account from further losses. Always ensure you maintain a sufficient free margin relative to your open positions.

No. Leverage varies by asset class and instrument. Major forex pairs attract the highest leverage (up to 1:2000), while stocks and agricultural commodities attract lower leverage (up to 1:20). Please refer to our leverage rates table above or download our instrument specification sheet for the full details.

Negative balance protection is designed to ensure that, under normal market conditions, a client's account balance does not fall below zero as a result of trading activity. In extreme market conditions or exceptional circumstances, additional procedures may apply in accordance with the Client Agreement.

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