Academy · a story that scrolls

Leverage, told in six steps.

Scroll, and the drawing beside the words changes as each step arrives. The figures are examples chosen to make the sum easy.

One drawing for each step. The figures are examples chosen to make the sum easy.

01
You put down 1,000.
That is your money. Call it the stake. On its own it could buy a position of 1,000, and a 1% move would change it by 10.
02
At 1:100, it controls 100,000.
The stake has not grown. It is set aside as margin, and it answers for a position a hundred times its size.
03
The market moves 1%.
It would have moved 1% whatever you did. Leverage does not make a market move more.
04
On 100,000, that is 1,000.
The move is measured on the position, not on the stake. One per cent of the position is the whole of the stake.
05
For you, or against you.
If it went your way, the stake has doubled. If it went the other way, the stake is gone. Same move, same size, the other direction.
06
So choose a smaller position.
At 10,000 the same 1% move is 100: a tenth of the stake. The leverage on offer did not change. The size you took did.

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.

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You put down 1,000.

At 1:100, it controls 100,000.

The market moves 1%.

On 100,000, that is 1,000.

For you, or against you.

So choose a smaller position.

You put down 1,000.

At 1:100, it controls 100,000.

The market moves 1%.

On 100,000, that is 1,000.

For you, or against you.

So choose a smaller position.