Dynamic leverage¶

This section explains how dynamic leverage works and how margin used in positions is calculated in cTrader. The margin used by open positions depends on the leverage applied at the time each position is opened. Dynamic leverage can operate in two distinct ways:

Margin requirements are recalculated with every relevant event.
Margin is calculated when the position is opened and remains fixed for the entire duration of the position.

This section covers both approaches. Understanding how leverage and margin interact is fundamental to managing risk effectively in cTrader. The concepts below explain how your trading power, required collateral and total exposure are determined for each position.

Leverage – enables you to trade using borrowed funds from your broker. By depositing your own money as collateral, you can borrow significantly larger amounts to increase your trading power. The leverage ratio shows the relationship between your deposited and borrowed funds.

Margin – the amount of your own capital set aside as collateral to open a position. The size of the margin depends on the leverage applied.

Exposure – the total value of the asset at risk. It is calculated per symbol and varies based on the direction of trading. Positions of the same symbol in the same direction increase exposure, while those in the opposite direction reduce it.

Warning

While leverage allows you to amplify your market exposure using borrowed capital to potentially increase gains, it can also magnify losses.

Leverage types¶

Account leverage¶

Each trading account has a defined leverage at the time of creation. However, the actual leverage applied when entering a trade may vary, as different symbols can have different leverage settings.

Example

You may typically receive leverage up to 1:500 on major currency instruments, but brokers often offer much lower leverage (1:10 to 1:50) for highly volatile symbols such as minor pairs, stocks, natural resources, precious metals and cryptocurrencies.

In these cases, the account leverage acts as an upper limit. If the symbol leverage is lower than the account leverage, the symbol leverage is applied. If the symbol leverage is higher, the account leverage takes precedence.

Additionally, different volumes of the same symbol may have different leverage rates depending on the size of the position.

Dynamic (volume-based) leverage¶

This is symbol leverage, which changes depending on your exposure – the higher your exposure, the lower the leverage provided by your broker.

Note

Leverage volume is always displayed in USD, regardless of the symbol.

Margin calculation¶

Margin is calculated based on the symbol leverage and exposure.

You can view the required margin for both directions before placing a trade in the New order menu and selecting buy or sell. The required margin is always displayed in your account currency and is calculated using the current ask and bid prices, based on the specified number of lots.

Note

The margin for cross pairs (symbols that do not include USD) is first converted to USD, then to your account currency if the required symbol is not available from your broker.

Even though cTrader calculates margin automatically, it is important to understand how the calculation works.

Example

Suppose you want to open a position of 1,000,000 for EURUSD using dynamic leverage. The volume-based dynamic leverage tiers are:

≤ 1 million USD = 1:500
≤ 5 million USD = 1:200
> 5 million USD = 1:100

Leverage is always stated in USD. In this example, if EURUSD is traded at 1.21345, then EUR 1,000,000 is equivalent to USD 1,213,450.

This falls across two dynamic leverage tiers:

1:500 applies to the first 1,000,000 USD.
1:200 applies to the remaining 213,450 USD.

The required margin is calculated as follows:

1,000,000 ÷ 500 = 2,000 USD
213,450 ÷ 200 = 1,067.25 USD

Total margin required: 2,000 + 1,067.25 = 3,067.25 USD

The total margin used to secure all open positions in the trading account, along with other key financial details, is displayed in Trade Watch.

Position margin recalculation¶

Reducing, increasing, closing or reversing positions changes your exposure and may affect the required margin.

Depending on your broker, your margin may or may not be recalculated automatically. To better understand how margin is recalculated, the following four cases illustrate what happens if your broker:

Allows automatic margin recalculation
Does not allow automatic margin recalculation
Changes dynamic leverage with margin recalculation enabled
Changes dynamic leverage with margin recalculation disabled

Contact your broker to confirm which method is applied.

Note

A symbol with USD as the base currency (USDJPY) was selected to avoid conversion when calculating dynamic leverage tiers, which are always stated in USD.

Case 1¶

This case involves a trading situation when the margin is automatically recalculated.

Account leverage: 500
Account currency: USD

Dynamic leverage:

Example

Open positions:

Position 1 – 1,000,000 (buy) USDJPY, margin used for position: 2,000
Position 2 – 1,000,000 (buy) USDJPY, margin used for position: 5,000
Position 3 – 1,000,000 (buy) USDJPY, margin used for position: 10,000

Total margin used: 17,000 USD

Step 1: Trader closes position 2 by 500,000.

Example

This results in:

Margin position 1: 1,000,000 / 500 (leverage) = 2,000
Margin position 2: 500,000 / 200 (leverage) = 2,500
Margin position 3:

500,000 / 200 (leverage) = 2,500

500,000 / 100 (leverage) = 5,000

Total margin used: 12,000 USD

Case 2¶

This case involves a trading situation when the margin is not recalculated.

Account leverage: 500
Account currency: USD

Dynamic leverage:

Example

Open positions:

Position 1 – 1,000,000 (buy) USDJPY, margin used for position: 2,000
Position 2 – 1,000,000 (buy) USDJPY, margin used for position: 5,000
Position 3 – 1,000,000 (buy) USDJPY, margin used for position: 10,000

Total margin used: 17,000 USD

Step 1: Trader entirely closes position 2.

Example

This results in:

Total margin used: 2,000 + 10,000 = 12,000 USD

Step 2: Open one more position for 1,000,000 USDJPY (position 4).

Example

This results in:

Margin position 4: 1,000,000 / 100 (leverage) = 10,000

Now there are 3 positions.

Even though the exposure remains the same (3 million), the margin is significantly higher because the margin for position 3 was not recalculated.

Total margin used: 12,000 + 10,000 = 22,000 USD

Step 3: Partially close position 4 and position 1 by 500,000 each.

Example

This results in:

Margin position 4: 10,000 / 2 = 5,000
Margin position 1: 2,000 / 2 = 1,000

Summary:

Position 1 – 500,000 BUY USDJPY, margin used: 1,000 USD
Position 3 – 1,000,000 BUY USDJPY, margin used: 10,000 USD
Position 4 – 500,000 BUY USDJPY, margin used: 5,000 USD

Total margin used: 1,000 + 10,000 + 5,000 = 16,000 USD

Case 3¶

This case involves a situation where the broker changes the dynamic leverage, and the margin is recalculated.

Account leverage: 500
Account currency: USD

Dynamic leverage:

Example

Open positions:

Position 1 – 1,000,000 (buy) USDJPY, margin used for position: 2,000
Position 2 – 1,000,000 (buy) USDJPY, margin used for position: 5,000
Position 3 – 1,000,000 (buy) USDJPY, margin used for position: 10,000

Total margin used: 17,000 USD

Step 1: Broker changes dynamic leverage for the symbol.

Example

Margin position 1: 1,000,000 / 200 (leverage) = 5,000
Margin position 2: 1,000,000 / 100 (leverage) = 10,000
Margin position 3: 1,000,000 / 50 (leverage) = 20,000

Total margin used: 35,000 USD

Note

Your broker will notify you of any upcoming changes to leverage. You should carefully review these changes to understand whether they will affect you.

If your margin falls below the stop out level, your open positions may be fully or partially closed to restore the required margin.

Case 4¶

This case involves a situation where the broker changes the dynamic leverage, and the margin is not recalculated.

Account leverage: 500
Account currency: USD

Dynamic leverage:

Example

Open positions:

Position 1 – 1,000,000 (buy) USDJPY, margin used for position: 2,000
Position 2 – 1,000,000 (buy) USDJPY, margin used for position: 5,000
Position 3 – 1,000,000 (buy) USDJPY, margin used for position: 10,000

Total margin used: 17,000 USD

Step 1: Broker changes dynamic leverage for the symbol.

Step 2: Close position 2

Example

Total margin used: 2,000 + 10,000 = 12,000 USD

Step 3: Open position 4: 1,000,000 (buy) USDJPY.

Example

This results in:

Margin position 4: 1,000,000 / 50 (leverage) = 20,000

Total margin used: 2,000 + 10,000 + 20,000 = 32,000 USD