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// LEVERAGE EXPLAINED
What is leverage, and what does 1:500 mean?
Leverage lets you control a position larger than your account balance, with your own money acting as margin. At 1:500, $1,000 of margin controls a $500,000 position — which multiplies every gain by 500 and every loss by exactly the same amount.
How the number works
The ratio is position size to margin. 1:500 means you post 1/500th of the position's value, or 0.2%. A standard lot of EUR/USD is €100,000; at 1:500 you need about €200 of margin to open it. The rest is extended by the broker for as long as the position stays open and your account can support it.
The part that gets people
Leverage multiplies the outcome, not the odds. On a $500,000 position a 0.2% move against you wipes out the $1,000 of margin behind it. That is roughly 20 pips on EUR/USD — a normal Tuesday. Leverage is not free money and it is not a strategy; it is a multiplier applied to a decision you have already made. If the decision is wrong, it is wrong 500 times faster.
Flat vs tiered leverage
Many brokers reduce your leverage as your position grows — you open at 1:500 and find yourself at 1:100 by the time the position is worth having. That is a tiered model, and it is rarely stated up front. Vexoda's 1:500 is flat: the same on your first lot and your hundredth, with no volume brackets that quietly cut it down as exposure grows.
Using it without being destroyed by it
Size the position from the risk you accept, not from the margin you are allowed. Decide what a loss costs you first, put the stop where the idea is wrong, and let those two numbers determine the size — then check that the margin covers it. Traders who blow up rarely do it because leverage was available; they do it because leverage decided their size for them.
| Leverage | Margin for $100,000 | Move that wipes the margin |
|---|---|---|
| 1:10 | $10,000 | 10% |
| 1:100 | $1,000 | 1% |
| 1:500 | $200 | 0.2% |