# Leverage calculator: effective leverage and risk

> Free leverage calculator. See your effective leverage, what a 1% price move does to your account, and the move that would wipe it out.

Written by [Tactfolio research team](https://tactfolio.com/about/editorial-policy.md), published 2026-10-16, updated 2026-10-16.

**Leverage** means your trades are worth more than the money in your account. Effective leverage is the total value of your open trades divided by the money in your account. This leverage calculator shows that number and how hard a price move would hit your account.

- $50,000 of trades on a $10,000 account is 5:1 leverage.
- At 5:1, a 1% price move changes your account by 5%.
- At 5:1, a 20% price move against you wipes out the account.
- The leverage your broker offers is a limit, not a target.
- Leverage makes losses bigger as well as gains. You can lose more than you put in.

## How to use the leverage calculator

Type the money in your account and the total value of your open trades. Use the full value of each trade, not the margin. The calculator shows your effective leverage, what a 1% price move does to your account, and the price move that would wipe it out.

It works for any market: stocks, forex, crypto or futures.

## How do you calculate leverage?

Effective leverage is the full value of your trades divided by the money in your account, which is your **equity**.

```text
leverage = total value of open trades ÷ equity
account change from a 1% move = leverage × 1%
move that wipes out the account = 100% ÷ leverage
```

The table shows how fast risk grows as leverage rises.

| Leverage | A 1% move changes your account by | A move against you that wipes it out |
| --- | --- | --- |
| 1:1 | 1% | 100% |
| 2:1 | 2% | 50% |
| 5:1 | 5% | 20% |
| 10:1 | 10% | 10% |
| 30:1 | 30% | 3.33% |
| 50:1 | 50% | 2% |
| 100:1 | 100% | 1% |

## A worked example

Say you have $10,000 in your account and open trades worth $50,000.

1. Your leverage is $50,000 ÷ $10,000 = 5:1.
2. A 1% move in your trades is $500. That is 5% of your account.
3. A 20% move against you is $10,000. That is all of your money.

Without leverage, a 20% drop would cost you 20%. With 5:1 leverage, it costs you everything.

## Is broker leverage the same as my leverage?

No. The leverage your broker offers is the most you are allowed to use. Your effective leverage is what you actually use. A broker may offer 30:1, but a trade worth $20,000 on a $10,000 account uses only 2:1.

Regulators set limits on what brokers can offer. In the US, the rules for retail forex ask for at least 2% margin on major currency pairs and 5% on others. That works out to at most 50:1 and 20:1. In the EU, retail traders get at most 30:1 on major currency pairs and 20:1 on other pairs, gold and major indices. The [margin calculator](https://tactfolio.com/trading-tools/margin-calculator.md) shows the deposit each level needs.

Options give leverage another way: a small premium controls 100 shares. The [options profit calculator](https://tactfolio.com/trading-tools/options-profit-calculator.md) shows what that can win or lose.

## What about leveraged ETFs?

A **leveraged ETF** is a fund that aims to return 2 or 3 times an index's move on each day. The fund does the borrowing, so you can't lose more than you put in. But these funds reset daily. Held for longer, their returns can differ a lot from the multiple in their name. FINRA says they are usually not suitable for retail investors who plan to hold them longer than one trading day.

You can see one in action in the [Leverage Rotation Strategy](https://tactfolio.com/strategies/leverage-rotation-strategy.md). It holds a fund that aims for 3 times the S&P 500's daily move, but only while the market is above its 200-day average. Its page shows its yearly returns and its worst drop.

## What about crypto leverage?

Crypto exchanges let traders use leverage on **perpetual futures**, often called perps. Many offer far more leverage than a stock broker. The math is the same as in the table above. At 20:1, a 5% move against you wipes out your margin, and crypto prices can move that much in a day.

An exchange closes a losing position on its own before the margin is gone. This is called **liquidation**. It usually comes a little before the wipe-out move in the table, because the exchange keeps a small buffer. Perps also charge or pay a **funding rate** on a regular schedule, which changes the cost of holding a trade.

Tactfolio can test rules on Hyperliquid perps, such as BTC, for backtest and paper or testnet only. Real-money crypto trading is not available on Tactfolio.

Leverage makes losses bigger as well as gains. You can lose more than you put in.

## Common mistakes with leverage

- **Counting only the margin.** Leverage comes from the full value of your trades. Add up every open position.
- **Using the most leverage on offer.** At 50:1, a 2% move against you wipes out your account.
- **Forgetting that losses shrink your account.** After a loss, the same trades are a bigger multiple of what is left. Your leverage goes up.
- **Holding a leveraged ETF as if it were the index.** Over many days, a 3x fund can return far more or far less than 3 times the index.

## Try it on Tactfolio

Tactfolio's stock and ETF strategies can't borrow or sell short. They can hold leveraged ETFs like any other fund, using their real price history. In the [Tactfolio strategy builder](https://tactfolio.com/builder) you can backtest a rule that holds one and see its worst drop before you risk money. Read [how to read a backtest](https://tactfolio.com/docs/concepts/reading-a-backtest.md) to judge the result. For forex trades, try the [pip calculator](https://tactfolio.com/trading-tools/pip-calculator.md) and the [forex profit calculator](https://tactfolio.com/trading-tools/forex-profit-calculator.md). Every tool is on the [free trading calculators](https://tactfolio.com/trading-tools.md) page.

## Common questions

### What is a leverage calculator?

A leverage calculator divides the full value of your trades by the money in your account. The answer is your effective leverage. It also shows how much a price move would change your account.

### What does 1:100 leverage mean?

It means you can open trades worth up to 100 times your deposit. With $1,000 you could control $100,000. At that size, a 1% move against you wipes out the $1,000.

### What is a good leverage ratio for beginners?

There is no single right number for everyone. Lower leverage means a bigger price move is needed to hurt you. Many regulators cap retail forex at 30:1 or 50:1 on major pairs, and those are limits, not suggestions.

### Is leverage the same as margin?

No. Leverage is how many times bigger your trades are than your money. Margin is the deposit your broker holds. Margin as a share of a trade is 100% divided by the leverage.

### How does leverage work in crypto?

Crypto exchanges offer leverage on perpetual futures. At 10:1, $1,000 controls a $10,000 position, and a 10% move against you wipes out the $1,000. The exchange usually closes the trade a little earlier, which is called liquidation.

### Can leverage make me lose more than I deposit?

With a broker account, yes. A fast move can push your losses past your deposit. A leveraged ETF is different, because the fund borrows, so the most you can lose is what you paid for it.

## Understand the numbers

- [Leverage](https://tactfolio.com/learn/leverage-explained.md): What leverage is, how to work out a leverage ratio, and how 2:1 and 10:1 change gains and losses.
- [Leveraged ETFs](https://tactfolio.com/learn/leveraged-etfs.md): How a leveraged ETF works, why the daily reset makes long-term returns drift, a two-day 2x and 3x example, and what regulators warn.
- [QQQ vs TQQQ](https://tactfolio.com/etf-comparisons/qqq-vs-tqqq.md): QQQ vs TQQQ: what each ETF holds, what it costs, and how both did over the same dates, with yearly returns and worst drops.

## Sources

- [17 CFR 5.9, Security deposits for retail forex transactions](https://www.ecfr.gov/current/title-17/chapter-I/part-5/section-5.9), Electronic Code of Federal Regulations, accessed 2026-10-16
- [ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors](https://www.esma.europa.eu/press-news/esma-news/esma-agrees-prohibit-binary-options-and-restrict-cfds-protect-retail-investors), European Securities and Markets Authority, accessed 2026-10-16
- [Regulatory Notice 09-31, Non-Traditional ETFs](https://www.finra.org/rules-guidance/notices/09-31), FINRA, accessed 2026-10-16