Best Leverage for Beginners with Small Accounts

Common mistakes beginners make trading with leverage

Even when traders understand leverage, many still end up losing money because they keep making the same mistakes. Let’s go over a few of the most common ones and talk about how to avoid them.

• Over-leveraging: Opening trades with leverage like 1:500 or 1:1000 might seem thrilling at first, but it’s dangerous. A tiny 1–2% move against you can wipe out your entire account. It’s better to start small — something like 1:10 or 1:20 — until you can show consistent results.

• Trading without a stop-loss: One unexpected spike can destroy weeks of progress. Always set a stop-loss before entering the trade.

• Chasing losses: After a losing trade, it can be tempting to double the lot size to make the money back. This usually just accelerates the wipeout. Reduce your position size or take a break instead of revenge trading.

• Ignoring margin level: Many traders don’t notice when their margin level drops close to 100%, when the broker starts closing trades. Keep your margin level above 300% to be safe.

How to choose the right leverage ratio

Consider the key factors

Your experience: it’s always better to start small. Err on the side of caution and the possible mistakes won’t cost you too much. Increase leverage only after gaining consistent profits.

The account size: sometimes the temptation to use high leverage starting with a small sum is great. Don’t give in, remember that high leverage like 1:500 or 1:1000 can wipe out a small account very quickly.

Your risk tolerance: lower leverage means lower risk per trade. Check out how risk tolerance corresponds to account size:

How much leverage you can use depends on where your broker is regulated:

• In the EU or UK, retail traders can only use up to 1:30 leverage.

• In the US, the limit is 1:50.

• Some offshore brokers let you use very high leverage, like 1:500 or even 1:1000.

Leverage ranges by instrument type

Different markets move in different ways. Some stay steady most of the time, while others can swing hard without warning. Use lower leverage when you trade on volatile markets like gold or crypto. Smaller positions give you space to manage losses if prices swing fast. In calmer markets such as major currency pairs, where price moves are steadier and easier to predict, you can use a bit more leverage.

Leverage ranges for different trading styles

How much leverage you use should fit the way you trade. If you’re the kind of trader who holds positions for weeks, you’ll want lower leverage to stay safe. If you trade more actively, you might use a little more.

• Long-term trading (position trading): around 1:5 to 1:10
  When you keep trades open for a long time, it’s better to stay conservative. Markets can swing up and down before your idea plays out. Using lower leverage gives your trades space to breathe without putting your account at risk too quickly.

• Swing trading: around 1:10 to 1:20
  Swing traders usually hold positions for a few days to catch medium-term moves. You’ll need some leverage to make those trades worthwhile, but still keep it modest. Never put yourself in a position where one bad move is enough to undo a week of solid decisions.

• Intraday trading (day trading): around 1:20 to 1:50
  Day traders open and close positions on the same day. Because trades are shorter and more frequent, a bit more leverage can help amplify returns. However, the danger rises just as fast. Even a small price jump in the wrong direction can lead to big losses if you overdo it.

Extreme leverage like 1:100 or more might look tempting, but it’s not a good idea for beginners or small accounts. Basically, the higher you go, the smaller the mistake it takes to lose your money.

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Calculate your position size

To match leverage with risk, use a position size calculator. For example, say you have $10 in your account and use 1:20 leverage. Your buying power is $200, but you don’t have to use all of it. In fact, it’s better to risk only 1-2% of your capital per trade. You could trade 0.08 lots (micro lot) with a stop-loss of 50 pips.

Here are some more safe ways to proceed:

At $10 with 5% risk, you can open a standard micro lot (0.01), but that would already be pretty aggressive, as one 50-pip loss could shrink your account by 5%. To avoid losing all your money, it’s better to lower your risk percentage as your balance increases.

Other scenarios:

How to size positions safely

1. Risk percentage: Decide how much of your account you’re willing to lose on one trade. Usually 1–2%, or up to 5% if you’re just testing.

2. Stop-loss: Decide how far the price can move against you before you exit. Base it on chart data or a fixed amount.

3. Position size: Use a simple formula or calculator so your lot size matches your risk and stop.

4. Place the trade with a stop-loss and a take-profit.

Following these steps ensures you aren't guessing. Every trade should follow the same repeatable process.

Use risk management tools

Risk management can save you a lot of trouble and losses in the future, so don’t neglect it!

1. Always use stop-loss orders to minimize losses and take-profit orders to lock in gains.

2. Don’t risk more than 1–2% of your capital per trade.

3. Stick to micro lots (0.01) if your account is under $100.

Use a demo account to practice

Before trading with real money, try your strategy by using a demo account.

1. Open a demo account with your broker. For example, you can try out new strategies with the FBS Demo Account in the FBS Personal Area.

2. Set the same leverage you plan to use (e.g. 1:10).

3. Practice using stop-loss and managing lot size.

4. Track your performance for at least 1–2 months to make a thorough analysis.

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Monitor margin level

Margin level is equity (your balance + floating profit/loss) divided by used margin (total margin locked for open positions). Multiply the result by 100 and you’ll get margin level expressed as a percentage.

Safe margin level is above 300%. If you see that, you're using margin conservatively. From 100 to 300% it gets risky.: Manage your trades. The danger zone starts below 100%: the broker may close your trades (i.e. risk of margin call).

Margin level shows how safe your account is relative to the margin you’re using. Here’s an example:

Your used margin is $100.

• Equity is $300 → margin level = 300% (safe zone).

• Equity drops to $150 → margin level = 150% (warning zone).

• Equity falls to $100 → margin level = 100% (danger — broker may start closing trades).

Always try to keep margin level above 300% before opening new positions.

Margin-based vs. real leverage

Margin-based leverage measures how much margin you need compared to your total trade value. It doesn’t always show your true risk, though. Real leverage shows your real exposure, not just what your broker allows.

Let’s say your account balance is $100 and you open a trade worth $500. Your real leverage is 5:1. If you open trades worth $1000, it becomes 10:1.

Review and adjust trades

Keep a trading journal and analyze your trades regularly. Adjust leverage or position size if you’re too close to wiping out your account. Your goal should be consistent, small gains, not jackpots!

Glossary

• Leverage: The ratio that shows how much bigger your trade size is compared to your own capital.

• Margin: The portion of your account balance that gets locked as collateral when you open a leveraged position.

• Equity: Your account balance plus or minus any floating profit or loss from open trades.

• Used margin: The total amount of margin currently tied up in open trades.

• Margin level: (Equity ÷ Used margin × 100%). Tells you how close you are to a margin call.

• Stop-out: When your margin level falls too low and the broker automatically closes trades.

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