Margin vs Leverage
Look-alike pair
Full entries: Margin · Leverage.
Margin is the collateral you must set aside to open and hold a position, while leverage is the ratio that determines how large that position can be relative to your capital. The single difference that matters: margin is the money you cannot use elsewhere, leverage is the multiplier that dictates how much market exposure that money controls.
Side by side
| Margin | Leverage | |
|---|---|---|
| Definition | The portion of your account equity that is locked as collateral for a trade. | The ratio of total position size to the margin required, expressed as a multiple (e.g., 10:1). |
| Units | Expressed in currency (e.g., $500 margin). | Expressed as a ratio or multiple (e.g., 20:1 leverage). |
| Who sets it | Brokers and regulators set minimum margin requirements; these vary by broker, country, and asset class. | Brokers and regulators set maximum leverage limits; these vary by broker, country, and asset class. |
| Effect on risk | Higher margin reduces the position size you can open with a given account balance. | Higher leverage increases the potential profit and loss per unit of price movement. |
| Field mark | Displayed as a dollar amount or percentage of equity, often labeled 'Margin Required' or 'Initial Margin'. | Displayed as a ratio like '1:100' or '100:1', often labeled 'Leverage' or 'Max Leverage'. |
Which word to use
Use margin when referring to the actual funds set aside as collateral, and use leverage when referring to the borrowing ratio that amplifies your buying power.
Family: XI · Look-alikes · Index A–Z