MT5 leverage and margin requirement: what changes and what does not

Leverage sets how much margin a position needs, not how much a pip is worth. Understand the formula, the tiers and the limits.

Leverage is one of the first settings a trader meets on a new MetaTrader 5 account and one of the least understood. It is often described as a way to make more profit, which is misleading. Leverage changes how much margin the broker holds for a position, not how much a pip is worth. This page explains the margin calculation in plain steps, how leverage appears in your account, why a position can need a different margin than a calculator predicted, and what to record in a journal.

What leverage does and does not do

Leverage is a ratio between the size of a position and the margin required to open it. With a ratio of 1:100, a position with a notional value of 10,000 units of account currency needs about 100 units of margin. With 1:500 the same position needs about 20. The profit or loss of the position is the same in both cases, because it depends on the volume and the price move, not on the leverage. The details of that calculation are covered on how MT5 calculates profit.

What changes is how much room you have. Margin that is held cannot be used for new positions, and free margin shrinks as it grows. Higher leverage leaves more free margin for the same position, which also makes it easier to open positions that are too large for the balance. The risk is in the volume you choose, not in the ratio the broker offers.

The basic margin formula

For a standard forex symbol the margin is usually computed from the volume in lots, the contract size, and the leverage, converted into account currency. In words: margin equals lots times contract size, divided by leverage, expressed in the account currency using the current rate. For a standard lot of 100,000 units on a 1:100 account that is 1,000 units of the base currency, converted to your account currency.

This is only one of several calculation modes. Contract specifications can use other formulas for CFDs, futures, exchange instruments or indices, and some symbols apply a fixed margin or a percentage regardless of the account leverage. You can see which mode your symbol uses in its specification, as described in the MT5 symbol specification. The size of a lot differs by instrument; see lot size and contract size.

Where leverage shows in MT5

• In the account information, usually reachable from the Navigator or the account properties, where the leverage of the login is listed. Menu names differ by build, so check your terminal.
• In the Trade tab summary line, where balance, equity, margin, free margin and margin level are shown. The ratio is explained in MT5 margin level.
• In the new order window, which shows the margin the order would need before you send it.
• In the symbol specification, where margin currency, calculation mode and any initial or maintenance margin are listed.

Why the margin can differ from a calculator

Online margin calculators use the simplest forex formula. Your terminal may show a different number for several reasons. The symbol may use a different calculation mode. The broker may use tiered leverage, where the effective ratio drops as the total position size grows. The broker may change leverage ahead of major news or over weekends, which many brokers state in their terms. The account currency may differ from the margin currency, so the figure moves with the exchange rate. Always trust the number the terminal shows in the order window over a generic calculator, and check the broker’s own pages for its leverage rules.

The page on XAUUSD leverage shows the arithmetic for gold, where margin figures are large enough that the differences are easy to see.

Leverage, margin calls and stop-out

When equity falls relative to the margin in use, the margin level drops. Most brokers define a margin call level and a stop-out level, at which the platform may start closing positions automatically. The levels are set by the broker, not by MetaTrader 5 itself. Leverage matters here only indirectly: a larger ratio makes it possible to carry a larger volume for the same balance, and the same adverse move then takes a bigger share of equity. The mechanics are on the page about stop-out and margin call, and the difference between balance and equity is on balance versus equity.

A worked example (hypothetical)

Two traders have the same small balance and take the same position of the same volume on the same symbol. One account has a lower leverage ratio and the other a higher one. The first terminal holds a larger margin and the second a smaller one, so the second trader has more free margin and a higher margin level on the day the position is opened. The price then moves against both by the same amount. Both lose the same amount of money, but the second account still has headroom to open another position, and if the trader does, the same move that was harmless a minute earlier can now push the margin level toward the stop-out level. The numbers are invented; the point is that leverage widens what you can do, not what you should do.

What to record in a journal

• The leverage of the account at the time of the trade, since brokers can change it later.
• The margin the order window showed, so you can see how much of the account each trade used.
• The planned risk in account currency, which does not depend on leverage.
• A note when a position was larger than your plan allowed, and why.

AI Trading Journal, a Windows app for MetaTrader 5 only, reads the closed positions from your account and records each as one entry with profit plus commission plus swap. It does not store the leverage, the margin used or floating profit on open positions, so the items above belong in the notes field. The app is read-only: it never places, modifies or closes a trade. See MT5 trading statistics for the figures it can help you review afterwards.

Limits and cautions

• Leverage rules, tiers and margin calculation modes are set by the broker and the symbol; check your own account.
• Regulators in some regions cap leverage for retail accounts; check the rules that apply to you.
• This page is education about a platform setting, not trading advice.

Frequently asked questions

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