Keep four amounts separate
Position value is the market exposure. Required margin is the amount demanded to support it. Account equity is the account’s value including unrealised profit or loss. Free margin is a platform-defined measure of remaining capacity, typically affected by equity and margin already required. Mixing these quantities makes a risk calculation hard to interpret.
In a hypothetical single-currency example, 30,000 of exposure at a 5% margin requirement needs 1,500 of margin. The reciprocal of 5% is 20, so the requirement corresponds to 20:1 exposure to required margin. This is not a quote of any broker’s available leverage.
Effective leverage depends on equity
If that hypothetical account contains 5,000 of equity and 30,000 of exposure, its simple exposure-to-equity ratio is 6:1. That differs from the 20:1 ratio implied by the minimum margin requirement. An advertised maximum therefore does not tell you an account’s current effective exposure.
A 1% adverse move on 30,000 of exposure is about 300 before costs in this simplified linear example. Relative to 5,000 equity, that is 6%. Relative to the 1,500 required margin, it is 20%. Costs, exchange-rate conversion, additional positions and changing requirements can alter the result. The arithmetic shows amplification, not a forecast.
For several positions, specify whether exposure is gross or net and how currencies have been converted. Offsetting numbers can hide different settlement, financing or execution conditions. A single ratio is a starting description, not a complete account risk model.
Why a close-out can happen before a chosen stop
A broker may close positions when account equity no longer meets its rules, regardless of where an individual stop has been placed. A stop itself may execute away from the requested level in a fast or gapped market unless a contractually guaranteed arrangement applies. Neither mechanism creates a suitable position size for the account holder.
Read whether close-out is assessed across the account, which positions may be closed first and how additional margin requirements are communicated. “I deposited the required margin” says nothing about the buffer left for price moves, funding and charges.
Great Britain retail CFD rules have a specific scope
The FCA’s published CFD intervention rules include leverage limits by underlying asset, account-level margin close-out and negative balance protection for retail clients within scope. The rules cover relevant CFD-like products, including rolling spot Forex. They do not make the products low risk.
The FCA also warns consumers about giving up retail protections by opting up to professional status. An overseas group entity or a professional account should not be assumed to offer the same protections as a Great Britain retail CFD account. Verify the legal entity, service permission and classification rather than relying on the brand’s global homepage.
Questions worth answering before comparing leverage
- What is the exposure in the same currency as the account equity?
- How does the margin requirement change by instrument or position size?
- What happens to equity after plausible adverse moves and charges?
- Which close-out and negative-balance terms apply to the exact entity and classification?
These are product-understanding questions, not an instruction to open a position. Use the entity checklist before making assumptions about protections. For transaction-cost arithmetic, the cost calculator has deliberately separate inputs and does not suggest a trade size.