Leverage and margin: how much of the trade is yours
What you learn in 3 minutesThis lesson shows how leverage and margin decide how much of your own money sits behind a trade. On a standard lot of EUR/USD near 1.0850, one pip is worth about ₱10.85, and the margin locked by the broker depends on the leverage you choose.
One standard lot of EUR/USD at 1.0850 under two leverage levels
| Step | Amount | Note |
|---|---|---|
| Contract size | 100,000 EUR | one standard lot on EUR/USD |
| Position value in US dollars | $108,500 | 100,000 EUR multiplied by the rate 1.0850 |
| Position value in pesos | ₱6,184,500 | converted at an assumed rate of ₱57 to $1; the rate moves daily |
| Margin at 1:30 leverage | ₱206,150 | ₱6,184,500 divided by 30 |
| Margin at 1:500 leverage | ₱12,369 | ₱6,184,500 divided by 500 |
| Value of one pip | ₱10.85 | 10 units of the quote currency, converted at ₱57 to $1 |
The broker may round the margin, add a small buffer, or quote a different conversion rate at the moment of the trade. Some brokers also charge a spread or commission on top. The figures above are worked from the numbers given, not from a live quote.
The mistake people make here
The common mistake is to treat low margin as free money. At 1:500, the margin is only ₱12,369, so it looks like a small deposit controls a ₱6,184,500 position. But the pip value stays ₱10.85, and a 100-pip move against the position is a loss of ₱1,085, which is close to a tenth of that margin. Instead, work out the pip value first, then decide the position size from the money you are willing to lose, not from the margin the broker asks for.Check yourself
At 1:100 leverage, what margin does one standard lot of EUR/USD need if the position value is ₱6,184,500?
₱6,184,500 divided by 100 is ₱61,845.
If one pip is ₱10.85, what is the loss on a 50-pip move against a standard lot?
50 multiplied by ₱10.85 is ₱542.50.