To open a 0.01 lot (1,000 units) trade, the full 1,000 EUR does not need to be used by the trader. This is where leverage is used.
Example with leverage:
- Open a 0.01 lot EURUSD (1,000 EUR position).
- Broker leverage = 1:100.
- Margin required = 1,000 ÷ 100 = 10 EUR.
- So only 10 EUR is needed in a trading account to control the 1,000 EUR trade.
If leverage were 1:30 (common in EU-regulated brokers):
- Margin = 1,000 ÷ 30 ≈ 33.3 EUR.
Key takeaway:
- The full 1,000 EUR is not needed — only need the margin, which is much smaller thanks to leverage.
- But leverage is double-edged – while it reduces the capital needed, it also magnifies both profits and losses.