Leverage maths: what 1:1000 does to a $200 account
At 1:2000 leverage a $200 account controls $400,000, which is about $40 a pip, so five pips against you takes the margin. The arithmetic for every leverage tier, and why gating leverage on deposit size rather than experience is the real warning sign.
At 1:2000 leverage, a $200 account controls $400,000 of currency. That is about $40 of profit or loss for every pip EUR/USD moves, so roughly five pips against you takes the margin. EUR/USD moves five pips in ordinary trading, most days, several times an hour. That is the whole argument.
Brokers advertise high leverage as access. It is easier to see what it is by doing the arithmetic, which nobody does on the sign-up page.
The arithmetic
The sum is simple. Leverage tells you how much position a given margin controls. Position size tells you what a one-pip move is worth. Divide the account by the value per pip and you have the number of pips that empties it.
Taking a $200 account, EUR/USD, and the convention that one standard lot is 100,000 units and one pip on a standard lot is about $10:
| Leverage | Position controlled | Lots | Value of one pip | Pips to wipe the margin |
|---|---|---|---|---|
| 1:30, FCA, ESMA and ASIC cap on majors | $6,000 | 0.06 | $0.60 | 333 |
| 1:100, FSC Mauritius maximum | $20,000 | 0.20 | $2.00 | 100 |
| 1:600, Seekapa Pro tier | $120,000 | 1.20 | $12.00 | 17 |
| 1:1000, GFX Securities on forex | $200,000 | 2.00 | $20.00 | 10 |
| 1:2000, Versus Trade | $400,000 | 4.00 | $40.00 | 5 |
Two things to note before anyone objects.
First, this assumes you use all the leverage available. Nobody has to. Leverage is a ceiling, not an instruction, and a trader at a 1:2000 broker can open a 0.01 lot position and take the same risk as at a regulated one. The reason the ceiling still matters is that it is sold as the reason to open the account, and the minimum deposits are set so that using it is the only way the account does anything interesting. Versus Trade’s minimum is $10. GFX Securities starts at $10 on its Raw Spread account. At those balances, restrained position sizing means trading amounts that are not worth the effort.
Second, in practice the position closes before the account reaches zero. Margin close-out rules force a liquidation when equity falls to a set fraction of margin, which under the EU regime is 50%. So the real answer to each row is fewer pips than shown, not more. The table is the optimistic version.
What five pips actually looks like
Context is the part that makes the number land. EUR/USD typically moves somewhere between 50 and 100 pips across a day. A single economic release can move it 30 or more in a minute. The spread itself, the gap between buy and sell price, is commonly one to two pips, so at 1:2000 the spread alone consumes a fifth to two fifths of the distance to a margin call before the market has moved at all.
Five pips is not a bad trade. It is noise. At that leverage you are not taking a view on the currency, you are betting that the next few minutes are quiet.
What the regulators did, and why
The caps are not arbitrary. The FCA, the European regulators through ESMA, and ASIC in Australia all limit retail leverage to 30:1 on major currency pairs and 20:1 on non-majors. They arrived at those figures after reviewing client outcome data from the firms themselves, and the disclosures those firms are now required to publish put the share of losing retail accounts commonly between 70 and 85 per cent even under the caps.
Offshore is where the caps stop. The FSC in Mauritius permits up to 100:1. The FSA in Seychelles sets no statutory cap at all, which is why an SD licence and 1:1000 can coexist on the same page without any rule being broken.
So high leverage is not evidence of fraud. It is evidence of a jurisdiction that does not cap it, which is a different claim and usually a true one.
The inversion worth watching for
There is a specific pattern that turns leverage from a risk setting into a warning sign, and it appears twice in our reviews.
Regulated regimes gate high leverage on experience. A trader who wants leverage above the retail cap must qualify as a professional client by evidencing trading history, portfolio size and relevant knowledge, and in doing so gives up retail protections knowingly.
Seekapa gates it on deposit size instead, escalating from 1:200 up to 1:600 as the account grows through its tiers. Exness runs the logic the other way again: unlimited leverage is available on accounts holding under $5,000 that meet its trading conditions, so the least capitalised clients get the most leverage.
Neither arrangement asks whether the client understands the instrument. One asks how much money they have brought, the other asks how little. That is a product design decision, and it tells you what the account is for.
How to think about it before you choose a broker
- Read the leverage ceiling as a jurisdiction signal, not a feature. 1:1000 tells you the licence comes from somewhere with no cap, which tells you about the compensation scheme and the supervisor as well.
- Check what the leverage is gated on. Experience is the regulated logic. Deposit size is not.
- Do the pip sum for your own balance before the first trade. Account divided by value per pip. If the answer is a number you could hit by accident, the position is too large regardless of what the broker permits.
- Remember the spread comes out of the same budget. At extreme leverage a wide spread is a meaningful fraction of your margin before the market moves.
- Check the licence first anyway. Leverage is a setting; the licence decides whether you can get the money back at all. Verify it on the regulator's own register, and see what a compensation scheme covers where things go wrong.
Frequently asked questions
How much can I lose with 1:1000 leverage?
The whole margin, quickly. On a $200 account using the full 1:1000, the position is $200,000, which is about $20 per pip on EUR/USD, so roughly ten pips against you exhausts the margin. Margin close-out normally liquidates the position before the balance reaches zero, so the practical figure is smaller still.
Why do some brokers offer 1:2000 when others cap at 1:30?
Because they are licensed in different places. The FCA, ESMA and ASIC cap retail leverage at 30:1 on majors and 20:1 on non-majors. The FSC in Mauritius allows up to 100:1 and the FSA in Seychelles sets no statutory cap. A broker offering 1:2000 is not breaking a rule; it is operating where the rule does not exist.
Is high leverage a sign of a scam broker?
Not on its own. It indicates an offshore licence, which usually also means no compensation scheme. It becomes a warning sign when leverage is gated on deposit size rather than on demonstrated experience, or when it is paired with a very low minimum deposit, because that combination is designed to make full use of the ceiling the only way the account does anything.
Does using less leverage make an offshore broker safe?
It reduces your market risk and changes nothing about counterparty risk. Trading 0.01 lots at an unlicensed broker still leaves your deposit with a firm that may not return it. Position sizing and licence checking solve different problems.
What is a margin call and a stop out?
A margin call warns that equity has fallen towards the margin requirement. A stop out, or margin close-out, is the automatic liquidation that follows when it falls to a set level, commonly 50% of required margin under the EU regime. It exists to stop the account going negative, and it means positions close before the balance is fully gone.
Sources
Retail leverage caps: FCA, ESMA and ASIC, 30:1 on major currency pairs and 20:1 on non-majors, and the 50% margin close-out rule under the EU regime. Verified at source.
FSC Mauritius up to 100:1; FSA Seychelles no statutory leverage cap. Verified at source.
Leverage ceilings, account tiers and minimum deposits taken from each broker’s own website and recorded, with check dates, in the reviews linked in the table.
Pip values use the standard convention of 100,000 units per standard lot and approximately $10 per pip per standard lot on EUR/USD. Figures are rounded and illustrative; exact values vary with the quote currency and the price at the time.