Gearing

By Laurent · Mar 2026

Another term for leverage in trading. Gearing describes the ratio of your position size to your actual capital. A gearing ratio of 20:1 means you control a position 20 times larger than your margin deposit.

What Is Gearing?

Gearing (also called leverage) is what makes forex accessible to retail traders. With gearing of 30:1, a $1,000 deposit controls a $30,000 position. This amplifies both profits and losses by the same factor. If your position gains 1%, you earn 30% on your deposited margin. If it loses 1%, you lose 30%. Under EU/ESMA rules, maximum gearing for retail traders is 30:1 on major pairs and 20:1 on minor pairs. Some jurisdictions allow up to 500:1.

How Gearing Affects Your Account

High gearing is the main reason retail traders blow accounts. A $1,000 account with 100:1 gearing controlling $100,000 in positions will receive a Margin Call from just a 1% adverse move. Even the most liquid pairs can easily move 1% in a single session. Use the Margin Calculator to see exactly how much margin your intended position requires, and keep total gearing below 10:1 for a more sustainable approach.

Key fact: Studies by regulators (ESMA, ASIC, FCA) consistently show that accounts using higher gearing have significantly higher loss rates. ESMA's decision to cap retail leverage at 30:1 was directly based on this data.

Effective Gearing vs. Maximum Gearing

Your broker may offer 30:1, but that does not mean you should use it. Effective gearing is your actual total position size divided by your account equity. If you have $5,000 and open $20,000 in positions, your effective gearing is 4:1, well within safe limits. Professional traders rarely exceed effective gearing of 5:1 to 10:1, regardless of what their broker allows. Control your effective gearing through Position Sizing and you control your risk.

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