Leverage Calculator For Traders

Using a leverage calculator helps you understand leverage positions to maximize gain. At WR Trading, we’ve developed an easy- to-understand leverage calculator that will help traders make informed decisions about their positions and risk management strategies.

How Does The Leverage Calculator Work?

Our leverage calculator operates on one single rule: it helps you determine the ratio between your trading position size and the capital you’d be investing. Once you input your account balance, desired position size and preferred leverage ratio, the calculator instantly shows you the margin required and the potential profits or losses you might make.

See our full tutorial:

Specifications of the Leverage Calculator:

The specifications of the leverage calculator include:

• Position Size at Trade Opened: This represents the total value of your position when you first enter the trade, calculated by multiplying the number of units by the entry price. For example, if you buy 100 shares at $50 each, your position size would be $5,000. This is important for determining your initial exposure and calculating the required margin.
• Position Size at Trade Closure: This part of the tool indicates the total value of your position when you exit the trade, calculated by multiplying the number of units by the exit price. The difference between opening and closing position sizes forms the basis for calculating your raw profit or loss before considering leverage effects
• Long/Short Position: Choose the type of position you’re holding for the trade. The calculator allows you to choose either Long or Short.
• Margin: This is the amount of capital required as collateral to maintain your leveraged position, typically expressed as a percentage of the total position size. For instance, with 10:1 leverage, you would need a 10% margin. It acts as a security deposit that protects the broker against potential losses.
• Required Leverage: This is the amount of leverage needed to open a specific position size with your available capital. It’s calculated by dividing the desired position size by your available margin. For example, if you want to open a $50,000 position with $5,000 in capital, you would need 10:1 leverage.
• Margin Level: This percentage shows the relationship between your equity and the used margin, calculated as (Equity / Used Margin) × 100. A margin level of 100% means your equity exactly matches your used margin, while higher percentages indicate a more available buffer against adverse price movements.
• Profit/Loss: The leverage calculator helps to calculate your actual gains or losses, taking into account both the raw price movement and the leverage effect. With leverage, both profits and losses are multiplied by your leverage ratio. For example, with 5:1 leverage, a 2% price movement results in a 10% profit or loss on your invested capital.
• Return with Leverage: This is the amplified return on your investment due to leverage, calculated as the percentage gain or loss multiplied by your leverage ratio. While leverage can significantly enhance returns when trades go in your favor, it’s crucial to understand that it equally magnifies potential losses. 

How To Calculate The Leverage Manually

While our calculator helps to automate the process, you can also decide to learn how to manually calculate the leverage. The basic formula is:

Leverage = Total Position Value / Required Margin

For example, if you open a $100,000 position with a $1,000 margin, your leverage would be:

$100,000 / $1,000 = 100x leverage (or 1:100).

What Is The Risk of Leveraged Trading?

Leveraged trading comes with a lot of risks that are important for every trader to understand. They include:

• Magnified Losses:  Although leverage can amplify your profits, they can also magnify your profits. A 1% market move against a 100x leveraged position could wipe out your entire margin.
• Margin Calls: When losses approach your margin amount, you either need to deposit additional funds or face the risk of an automatic position closure.
• Overnight Costs: Holding leveraged positions overnight can incur swap fees which may impact your profitability significantly.

At WR Trading, we focus on responsible leverage use and encourage new traders to start with lower ratios as they build experience.

For Which Assets Can Leverage Be Used?

Leverage can be used on several assets ranging from Forex to CFDs to Stocks and even Crypto. Let’s have a closer look at the different assets:

Forex

Forex markets typically offer varying leverage ratios depending on your jurisdiction and broker. According to major regulators like ESMA, retail forex leverage is often capped at 1:30 for major pairs in the EU. However, professional traders may access higher ratios. It is important to always check your local regulatory requirements and broker offerings.

See our Forex Leveraged Trading Guide here.

CFDs

Contract for Difference, also known as CFDs, provides flexible leverage options across various assets. The FCA provides comprehensive guidelines on CFD leverage limits. Different assets within CFDs have different leverage caps – typically lower for volatile assets and higher for stable ones.

See our CFD Trading Guide here.

Stocks

Stock trading leverage is somewhat more conservative due to market stability considerations and regulatory requirements. Despite that, the U.S. Federal Reserve Regulation sets standard margin requirements. Most brokers offer leverage between 1:2 to 1:4, depending on the market conditions and individual stock volatility. International markets may have different requirements.

See our Stocks Trading Guide here.

Cryptocurrencies

The dynamic cryptocurrency market requires careful leverage management and as a result,  major exchanges publish their leverage limits on their websites. Given the high volatility of crypto assets, many regulators have specific guidelines. CoinGecko and similar platforms maintain updated lists of exchanges and their leverage offerings.

See our Crypto Trading Guide here.

Metals

Precious metals trading combines traditional stability with modern leverage capabilities. The CME Group provides specific guidelines about futures margin requirements. As a result, leverage ratios vary based on market conditions and regulatory requirements.

Conclusion

Leverage is a powerful tool that requires proper risk management and careful consideration. At WR Trading, our leverage calculator helps you make informed choices and provides you with the support you may need for successful trading. Contact us now to get more personalized guidance on the use of leverage and learn more about our advanced leverage tools.