Leverage and margin explained simply
Leverage is the reason forex and gold trading can move an account fast — in both directions.
What is leverage?
Leverage means borrowing from your broker to control a bigger position than your cash alone would allow. With 50:1 leverage, $1,000 can control a $50,000 position.
What is margin?
Margin is the deposit the broker holds while your trade is open. At 50:1, a $50,000 position needs about $1,000 of margin (2%).
Limits in Canada and the US
Regulators cap retail leverage. In the US, NFA rules limit major currency pairs to 50:1 and minor pairs to 20:1. Canadian dealers regulated by CIRO also apply margin limits that vary by product. Your broker will show the exact margin for each instrument.
Margin calls and stop-outs
If losses eat into your account and your equity falls below the required margin, the broker can warn you (a margin call) and then close trades automatically (a stop-out) — often at the worst moment.