How it works
Brokers advertise maximum leverage, but that number says little about your actual exposure. What matters is how large your positions are compared with the money in your account. That ratio is your effective leverage.
The calculator converts the notional value of each open position into your account currency, adds them together and divides by your account equity.
Formula
Notional value of a position = units × price, converted to your account currency (if your account currency is the base currency, notional = units)
Effective leverage = total position notional ÷ account equity
A useful rule of thumb follows directly: the percentage change in your equity is roughly the percentage price move multiplied by your effective leverage.
Worked examples
All prices are illustrative.
Example 1: Two positions on a USD account
Account equity: $10,000
- Position A: 0.50 lots EUR/USD (50,000 units) at 1.0850 → notional = 50,000 × 1.0850 = $54,250
- Position B: 0.30 lots USD/JPY (30,000 units) → USD is the base currency, so notional = $30,000
Total notional = 54,250 + 30,000 = $84,250
Effective leverage = 84,250 ÷ 10,000 = 8.43:1 (rounded)
If both positions moved 1% against you at the same time, the loss would be about 1% × 84,250 = $842.50, or roughly 8.4% of equity.
Example 2: Same trade, different account sizes
You open 1 standard lot of EUR/USD at 1.0850 (notional $108,500).
| Account equity | Effective leverage | Equity change for a 1% price move |
|---|---|---|
| $5,000 | 21.7:1 | about 21.7% |
| $20,000 | 5.4:1 | about 5.4% |
| $100,000 | 1.1:1 | about 1.1% |
The trade is identical, but its impact on each account is very different.
Why effective leverage matters
Even major currency pairs can move 1% or more in a single day, particularly around important news. At 20:1 effective leverage, a 1% move changes your equity by about 20%. At 5:1, the same move changes it by about 5%. Effective leverage turns abstract price changes into concrete account swings, which makes it a useful check alongside per-trade risk.
Tips
- Recalculate as you add trades. Each new position raises total exposure even if each one is small on its own.
- Watch correlated pairs. Long EUR/USD and long GBP/USD often move together, so their combined exposure behaves like one larger trade. See currency correlation.
- Use equity, not deposit. After losses, the same positions represent higher effective leverage.
- Combine tools. Size each trade with the Lot Size Calculator and confirm deposit requirements with the Margin Calculator.
- Read more in What is leverage? and Portfolio risk.
Risk note
High leverage can lead to rapid and substantial losses, including losses that exceed your planned risk if markets gap. Effective leverage is a measure, not a target, and this calculator does not tell you what level to use. It is provided for educational purposes only.
Frequently asked questions
What is the difference between maximum and effective leverage?
Maximum leverage is the limit your broker allows, such as 30:1. Effective leverage is what you are actually using, based on the total size of your open positions relative to your equity.
Do long and short positions cancel out?
This calculator adds the notional value of every position to show gross exposure. Offsetting positions can reduce net risk, but correlations change, so gross exposure is a cautious measure.
Why use equity rather than balance?
Equity includes unrealized profits and losses on open trades, so it reflects what your account is actually worth right now.
Is there a safe level of effective leverage?
No level is risk-free. Lower effective leverage means each price move has a smaller effect on your account, but the appropriate level depends on your strategy and tolerance for loss.
Guide last reviewed .