How does leverage affect margin and Risk on my Vantage trading account?
Leverage affects the margin required to maintain a trading position and the amount of free margin available in your Vantage trading account. While higher leverage may reduce the margin requirement, it can also increase your potential risk exposure if you use it to open larger positions.
How does leverage affect my available margin?
Leverage allows you to control a position with a smaller amount of margin relative to its total value.
For example, consider a position with a total value of USD 60,000. Assuming the margin is calculated directly using leverage:
| Leverage | Estimated Margin Required |
|---|---|
| 1:200 | USD 300 |
| 1:400 | USD 150 |
This example illustrates how different leverage settings may affect the margin required for the same position. Actual requirements depend on the instrument's specifications and applicable trading conditions.
For further details, refer to How is margin calculated for vantage MT4(MetaTrader 4)/MT5(MetaTrader) trading accounts?
Does leverage change my trading profit or loss?
Leverage does not directly change the profit or loss generated by the same position size and market price movement.
For example, if a 0.2-lot GBP/USD position moves by 25 pips, the resulting profit or loss from that price movement remains the same whether the applicable leverage is 1:200 or 1:400, excluding trading costs.
However, higher leverage may allow you to open larger positions using the same amount of funds. Larger positions can result in greater profits or losses from equivalent market movements.
How does leverage affect margin calls and stop-outs?
A Margin Call (low margin warning) occurs when your margin level reaches the applicable margin-call threshold.
A Stop-Out (automatic position closure) may occur when your margin level falls to the applicable stop-out threshold, resulting in positions being closed automatically under the relevant trading conditions.
Changing your leverage does not, by itself, change these thresholds. However, changes in margin requirements can affect your free margin and margin level.
What happens when I change my account leverage?
Changing your account leverage does not automatically change the size of your existing positions.
However, where the applicable margin requirement changes, the margin allocated to your open positions may also be adjusted. This can affect your available free margin and overall margin level.
The impact depends on the instrument, account configuration, and applicable trading conditions.
What should I check before changing my leverage?
Before requesting a leverage adjustment, review how the change may affect the margin required to maintain your existing positions, available free margin, and overall margin level. Changes in margin requirements may reduce the funds available to support open positions and increase the risk of a Margin Call (low margin warning) or Stop-Out (automatic position closure).