Trading Conditions and Leverage Guide

1. What is Leverage and Margin Trading?

Leverage and margin trading is a trading method that allows you to "trade big with small capital."

You only need to deposit a portion of funds as margin, and the platform allows you to trade with a larger capital scale. The degree of trading amplification is determined by the leverage ratio.

Simply put:

• Leverage = Amplifies your trading scale
• Margin = The capital you deposit as collateral

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1.1 How It Works

① Leverage

Leverage allows you to control assets of greater value with less capital, acting as a "magnification factor."

② Margin

Margin is the deposit you must maintain to open and hold a position.

It is not borrowed money, but rather risk collateral that traders must pay.

③ Leverage Ratio

The leverage ratio represents how many times your margin can be amplified.

For example:

• Leverage of 10x → $1 margin can control $10 worth of assets.

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1.2 Examples

Example ①: Stock Trading

You want to buy stocks worth $10,000.

Using 10x leverage:

• You need to pay margin: $1,000
• The platform effectively provides the remaining $9,000

Ultimately, you control the entire $10,000 trade.

Example ②: Forex Trading

In the forex market:

• Margin is the platform deposit you must make when opening a position
• It is not a loan
• Its purpose is to ensure the performance capability of both trading parties

For example, using 100x leverage to trade a position worth $100,000, you only need $1,000 in margin.

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1.3 Risks and Returns

① Amplified Returns

Since you control the entire position value, when prices rise, profits are calculated based on the "amplified trading scale," not your small margin amount.

② Amplified Losses

Similarly, losses are also amplified and may even exceed your initial margin investment.

③ Risk Management is Essential

Due to leverage's ability to amplify volatility, risks are also amplified accordingly. Therefore, it is strongly recommended to:

• Set stop-loss orders
• Control position sizes
• Monitor margin levels
• Avoid margin calls leading to forced liquidation

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1.4 Summary in One Sentence

Leverage allows you to move large trades with small capital, and margin is the deposit you pay for this; it can amplify profits but also amplifies losses, making proper use and risk control crucial.

2. What Are the Common Types of Leverage?

In forex and CFD markets, leverage is not limited to a single form. Different platforms or instruments use different leverage systems, which affect the margin required to open positions and the degree of position amplification. There are mainly three applicable types of leverage:

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2.1. Account Leverage

① Concept

The base leverage set by the platform for your account when you open it. Unless there are special rules, all trades default to calculating margin using this leverage.

② Characteristics

• Used uniformly across the entire account
• Does not change with position size
• Most common and easiest to understand for beginners

③ Example

• Account leverage: 1:100
• Trading a position worth $100,000
• Required margin = $100,000 ÷ 100 = $1,000

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2.2. Fixed Leverage

① Concept

Certain instruments are forced by the platform to use fixed leverage, unaffected by account leverage. Common for: gold, crude oil, indices, and other high-volatility assets before major events.

② Characteristics

• Fixed by the platform, cannot be changed
• Independent of account leverage
• Used to prevent excessive leverage on high-risk instruments

③ Example

• Account leverage: 1:500
• Gold fixed leverage: 1:100
• Opening a $200,000 gold position
• Margin = $200,000 ÷ 100 = $2,000

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2.3. Step Leverage

① Concept

Different position ranges use different leverage, and margin is calculated in segments, similar to "tiered water or electricity rates."

② Characteristics

• Different leverage used for different ranges
• Later ranges typically have lower leverage
• More precise, commonly used on professional trading platforms

③ Example

• First 10 lots: 1:500
• 10–30 lots: 1:200
• Above 30 lots: 1:100

If you hold 40 lots, you must divide the margin into three segments, calculate separately, and sum them up.

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2.4. Instrument Step Leverage Table

The following table details the leverage configuration for each trading instrument:

Notes:

• Account Leverage: ✔ indicates applicable, ✗ indicates not applicable
• Fixed Leverage: ✔ indicates applicable, ✗ indicates not applicable
• Dynamic Leverage (HMR): Dynamic leverage ratio during high-risk periods (High Margin Requirement)
• Step Leverage: Leverage ratio corresponding to different lot size ranges (0-1 lots, 1-2 lots, 2-5 lots, 5-20 lots, 20-50 lots, 50+ lots)