Lots, leverage and margin explained
How position size, leverage and margin fit together, with a worked example.
Lots
A standard lot is 100,000 units of the base currency. A mini lot is 0.10 (10,000 units) and a micro lot is 0.01 (1,000 units). PipLadder sizes every rung in lots, and the reference method starts at 0.20 lots per $50,000 of portfolio.
Leverage
Leverage lets you control a larger position than your deposit alone could support. At 1:100 leverage, every $1 of margin controls $100 of position. It magnifies gains and losses equally, so higher leverage does not make a trade safer or better. It only makes your account react faster.
Margin
Margin is the part of your balance your broker sets aside to hold a position open. It is not a fee, and you get it back when the trade closes. The formula is: margin = position size in units x price / leverage (for a pair quoted in dollars).
Worked example: 0.20 lots of EUR/USD at 1.12 with 1:200 leverage. The position is 20,000 euros, which is worth about $22,400. Margin is $22,400 / 200 = $112.
Why margin level matters
Your margin level is equity divided by used margin. If floating losses push it below your broker's stop-out level, the broker starts closing positions automatically. A ladder adds margin with every rung, so you should always know the margin level at your deepest planned rung. PipLadder's planner shows this before you subscribe.