Leverage is a powerful tool in trading that allows you to control a larger position with a smaller amount of capital. At MH Markets, we offer two types of leverage: Fixed and Floating. You can choose which one to use for each trading account you create and change it after you create the account.
What is Fixed Leverage?
- Definition: Fixed leverage remains constant regardless of your account balance or trading volume.
- Example: If your account is set to 1:500 leverage, it will stay at that level for all trades.
- Impact on Margin: The margin requirement is predictable and does not change with trade size. This makes it easier for traders to plan and manage risk.
What is Floating Leverage?
- Definition: Our floating leverage model automatically adjusts ratios based on real-time equity. As your equity increases, your available leverage decreases.
- Example: For smaller equity, leverage might be 1:2000. As equity grows, leverage may reduce to 1:500 or lower.
- Impact on Margin: The Margin requirements increase as trade size grows. This mechanism helps reduce risk for larger accounts while maintaining flexibility for smaller ones. It requires careful monitoring.
Leverage adjustments vary depending on the instrument type and your account equity, with maximum leverage reaching up to 1:2000 for Forex currency pairs and gold.
Both fixed and floating leverage are affected by the Event-Based Margining (EBM)
Floating Leverage Auto Adjustment (ECN, Standard, Prime Accounts)
Instrument |
Equity (USD) | Auto Leverage |
|---|---|---|
Forex, Gold, Platinum |
0 - 500 | > 1:2000 |
| 500 - 1K | > 1:1000 |
|
| 1K - 10K | > 1:500 |
|
| 10K - 30K | > 1:300 |
|
| 30K - 50K | > 1:200 |
|
| More than 50K | > 1:100 |
|
CFD, Oil, Crypto |
All | Fixed 1:100 |
Stock, Silver |
All | Fixed 1:20 |
XNG |
All | Fixed 1:10 |
How Leverage Affects Trading: Is Higher Leverage Always Better?
Higher leverage is not necessarily better. While higher leverage lowers the margin requirement per trade, it provides greater exposure and potential profit alongside higher risk. Increasing leverage can reduce the margin required to open a position of the same size, but it does not reduce gains or losses caused by price movements in that position.
For example, assume a USD 10,000 position under otherwise identical conditions, excluding fees. At 1:100 leverage, the initial margin would be approximately USD 100; at 1:200, approximately USD 50. If the price moves 1% against the position, the loss would still be approximately USD 100 in both cases.
Because of this, higher leverage can make it easier to establish positions beyond your capacity to bear losses. Conversely, lower leverage requires a higher margin per trade. This limits position size and consequently reduces risk. The actual leverage available for an MH Markets account should be confirmed based on the instrument, account conditions, and applicable margin rules. Both fixed and floating leverage are also affected by Event-Based Margining (EBM).