Leverage changes required margin, not the market risk of a position. Calculate the cash loss at the stop, then add spread, commission, slippage and overnight funding before deciding whether the size is acceptable.
Created from deterministic market calculations and editorial review. AI may summarize evidence but cannot invent prices, levels or results.
Primary-source policy: exchange data and documentation, broker contract terms, and official regulator or market-education materials.
Change history: first published 13 Aug 2026; expanded 26 Aug; topic and methodology review 28 Aug 2026.Read the full methodology →What to remember
- Size from the stop, not from maximum leverage.
- A pip has different cash value at different sizes.
- Spread and swap can turn a marginal setup negative.
- Drawdown limits protect the next decision.
Leverage, margin and margin calls
Notional exposure equals price multiplied by units. Required margin is only collateral; a 1% market move still applies to the full notional position. Free margin falls as losses grow, and a broker may close positions at its published stop-out threshold. Never treat available leverage as a target.
Practical workflow: write the contract specification, planned entry, structural stop and target in one worksheet; calculate the position loss and all-in cost; then reject the idea if either exceeds the written account rule.
Pips, lots and all-in cost
A pip is a price increment; its cash value depends on the pair, quote currency and position size. A standard lot is usually 100,000 base units in spot forex terminology, but contract specifications vary. Add half/full spread as appropriate, commission, expected slippage, conversion and swap to the planned loss.
Practical workflow: write the contract specification, planned entry, structural stop and target in one worksheet; calculate the position loss and all-in cost; then reject the idea if either exceeds the written account rule.
Loss streaks and drawdown control
Drawdown is the decline from an equity peak. After repeated losses, reduce size or pause according to a written rule instead of increasing risk to recover. Evaluate expectancy over comparable trades and preserve an immutable journal; a recovery target must never justify a larger unplanned position.
Practical workflow: write the contract specification, planned entry, structural stop and target in one worksheet; calculate the position loss and all-in cost; then reject the idea if either exceeds the written account rule.