Market mechanics
The idea
Margin is collateral supporting a position. Leverage compares the position's notional value with your account equity. Lower required margin does not reduce the effect of a price move on an unchanged position. Broker close-out rules, financing and legal protections differ across products and jurisdictions.
A worked example
A USD 20,000 position on USD 1,000 equity has 20:1 effective leverage. A 1% adverse move in the position is about USD 200 before costs, or 20% of equity.
Try it yourself
Calculate notional exposure and effective leverage for a demo position. Locate the broker's margin close-out rules.
A mistake to avoid
Sizing a position from available margin instead of a defined loss budget.