LEARN TO TRADE · Beginner · 7 min read · 3 Nov 2026 · Navion Pro Research
Leverage and Margin: Why a Small Move Can Mean a Big Loss
Leverage lets you open a large position with a small amount of money. That is its appeal, and its danger. This guide explains how leverage and margin work, how margin is calculated, and why the same price move can mean very different results.
Trading leveraged products carries a high level of risk to your capital. Losses can exceed deposits. Past performance is not an indicator of future results.
Key Points
- Margin is the money set aside from your account to open and hold a position.
- Leverage is how many times larger your position is than that margin.
- Leverage does not change how far a price moves. It changes how much that move means for your money.
- At 100 times leverage, a 1% move against you can use up all of your margin.
Margin and leverage in plain terms
Think of margin as a deposit. To open a position worth $1,000, you might only need to put down $100. The provider holds that deposit while the trade is open.
Leverage is the ratio between the two. A $1,000 position backed by $100 of margin uses 10 times leverage.
Leverage makes a position bigger than your deposit. Gains and losses are worked out on the full position, not on the deposit.
How margin is calculated
For any position, the margin is its full value divided by the leverage.
This example is for illustration only. The price is not a real quote.
| Gold position | Position value at $3,900 an ounce | Margin at 10 times | Margin at 50 times | Margin at 100 times |
|---|---|---|---|---|
| 0.01 lot (1 ounce) | $3,900 | $390 | $78 | $39 |
| 0.10 lot (10 ounces) | $39,000 | $3,900 | $780 | $390 |
| 1 lot (100 ounces) | $390,000 | $39,000 | $7,800 | $3,900 |
Margin changes with the price, the size of the position, the leverage you choose and your account type.
The same move at different leverage
Here is what a 1% move against a position does to the margin behind it.
| Leverage | A 1% move against you costs | As a share of your margin |
|---|---|---|
| None (1 times) | 1% of the position | 1% |
| 10 times | 1% of the position | 10% |
| 50 times | 1% of the position | 50% |
| 100 times | 1% of the position | 100% |
The price moved by the same amount each time. Only the result changed.
The numbers on your account screen
| Term | What it means |
|---|---|
| Balance | The money in your account, not counting open trades |
| Equity | Your balance plus or minus the profit or loss on open trades |
| Used margin | The margin set aside for your open positions |
| Free margin | Equity minus used margin: what is left to open new trades or absorb losses |
| Margin level | Equity divided by used margin, shown as a percentage |
When open trades lose money, equity falls. As it falls, free margin shrinks and your margin level drops.
Margin calls and stop outs
If your margin level falls far enough, you may get a margin call: a warning that your account needs more funds to keep its positions open.
If it keeps falling and reaches the stop out level, positions can be closed automatically to limit further losses. The levels that trigger both depend on your account, and you can see them on the platform.
Using leverage with care
- Think in position size, not leverage. What matters is how big your position is compared with your account.
- Work out your loss before you open. Know what the trade costs you if the price reaches your stop loss.
- Keep free margin in reserve. A trade that uses almost all of your margin leaves no room for normal price swings.
- Watch your margin level. Check it whenever you have trades open, especially around big news.
- Try it on a demo first. See how leverage changes the numbers before real money is involved.
Risk disclosure: Trading involves significant risk of loss and is not suitable for all investors. Past performance is not indicative of future results. This brief is for information and education only. It is not investment advice, a recommendation or an instruction to buy or sell anything. The likely market reactions described here are our assessments of what could happen, not predictions, and markets can and often do move differently. Figures and forecasts come from third party sources and may change. Make your own decisions, and consider independent advice if you are unsure.
