Total position value divided by account equity, stating how many dollars of exposure each dollar of capital controls.
The leverage ratio answers one question: how big is the thing you are holding relative to what you own. A $30,000 account holding $90,000 of stock is at 3:1.
It is a better risk gauge than margin used, because it is denominated in the thing that actually moves. At 3:1, a 10% adverse move in the underlying is a 30% hit to equity; at 10:1, a 10% move wipes you out. Reverse the question when sizing: divide the loss you can tolerate by the move you consider plausible, and that is your maximum leverage.
Different products quote it differently - regulation-t gives 2:1 overnight on US stocks, day-trading-margin gives 4:1 intraday, futures often imply 15-30:1, and retail FX can reach 30:1 or more. Availability is not a recommendation.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.
Educational only, not advice. Spotted an error? Post in Site Feedback.