Leverage lets you control a position larger than your capital, by locking part of it as collateral (the margin). 30:1 leverage means with $1,000 margin, you can open a $30,000 position — 30× your capital.
Leverage amplifies both gains and losses. A 1% move in your favor on a 30× position = +30% on your capital. But 1% against you = -30%, and 3.3% against you = total wipeout.
EU regulatory caps (ESMA, since 2018):
- Major Forex pairs: 30:1 max
- Major stock indices: 20:1
- Gold, non-major Forex pairs: 20:1
- Stocks: 5:1
- Cryptocurrencies: 2:1
Outside the EU, offshore brokers offer extreme leverage (500:1, 1000:1, even 2000:1). According to stats from regulated EU brokers, 74-89% of retail accounts lose money, mostly due to mismanaged leverage.
Pro rule: available leverage is not the leverage you should use. A serious trader sizes positions based on stop-loss distance and never risks more than 1-2% of capital per trade, regardless of leverage offered.