Margin is collateral required to maintain an exposure. Leverage describes exposure relative to the capital supporting it. Neither tells you how far the market can move against the position. A small margin requirement can coexist with a large possible loss.
Track equity, used margin and free margin separately. Falling equity can trigger liquidation under your broker’s rules. Stop orders may slip or gap, and protections vary by product and jurisdiction. Check the actual agreement; do not treat a calculator’s planned stop loss as a guarantee.
Worked example
Illustration: 20,000 USD equivalent exposure at 20:1 leverage requires 1,000 USD margin. A 1% adverse move in that exposure is 200 USD before costs, regardless of the deposit calculation.
Check your understanding
If the broker halves its margin requirement, does that halve the price risk of an unchanged position?
Show explanation
No. The same size and price move produce the same price-move loss. Only the collateral requirement changed.
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