CFDs are leveraged. Most retail traders lose money, and you can lose more than you deposit.

Lesson 3 · 7 min

Leverage and margin

Leverage lets a small deposit control a large position. It multiplies losses exactly as much as gains.

How it works

With 1:30 leverage, $1,000 of margin controls a $30,000 position. A 1% move in the price is a $300 gain or loss: 30% of your margin.

Margin call and stop-out

If losses eat your free margin, the broker warns you (margin call) and then closes positions automatically (stop-out). The levels are in the broker's terms.

Limits by regulator

Regulators in the UK, EU and Australia cap retail leverage at 1:30 on major pairs and lower on other markets. Offshore entities often offer far more, with fewer protections.

Negative balance protection

Some regulators require that you can't lose more than your account balance. Check whether the entity you sign with offers it.

Quick check

1. With 1:50 leverage and $500 margin, how big a position can you open? $5,000 $25,000 $50,000

2. A 2% move against a 1:30 position costs how much of the margin? 2% 30% 60%

3. What is a stop-out? The broker closing your positions when margin runs low A profit target A holiday closure

Education only, not advice. CFDs are leveraged and most retail traders lose money.