Leverage is the reason spread betting and CFDs can be so capital-efficient — and the reason they carry genuinely high risk. Understanding exactly how it works, and how margin fits into it, is fundamental before you place a single trade.
What Leverage Actually Means
Leverage lets you control a larger position than the capital you put down would allow if you had to fund it in full. If a market offers 20:1 leverage, £500 of margin controls a £10,000 position. That's what makes these products capital-efficient — but it cuts both ways: your profit or loss is calculated on the full £10,000 exposure, not the £500 you actually put down.
| Scenario | Position Size | Margin Required (5%) | 1% Market Move |
|---|---|---|---|
| Without leverage thinking | £500 | £500 (fully funded) | £5 gain or loss |
| With 20:1 leverage | £10,000 | £500 | £100 gain or loss |
Illustrative example only. Actual margin requirements vary by market and are set by IG — always check current figures on the platform.
Margin Calls: What They Are, and Why They Happen
Margin is the deposit required to open and maintain a leveraged position. If a position moves against you enough that your account funds fall below what's needed to maintain it, you may receive a margin call — a request to add funds, or the position may be automatically closed to prevent the account going into a position it can't support.
This is a structural feature of leveraged trading, not something to be caught off guard by. It's also exactly why position sizing — how much of your account you commit to any single trade — matters more than almost anything else in risk management.
Why Position Sizing Controls Your Risk, Not Stop Distance Alone
It's tempting to think a tight stop loss automatically means low risk. It doesn't, by itself — because leverage means the same tight stop, at a larger position size, still risks a large amount of money. The position size and the stop distance together determine your actual pound risk, not either one in isolation.
Related Protections Worth Knowing
Leverage risk sits alongside two other protections worth understanding — negative balance protection, which prevents your account going negative even in an extreme market move, and guaranteed stops, which protect an individual position from gapping through a normal stop. We've covered both of these in more detail elsewhere:
Further reading: IG Academy has free structured courses covering leverage, margin, and risk management in more depth.
Size Every Leveraged Trade Correctly
Open a free IG account and your first month of the Trader's Edge Formula software — including the Position Sizer — is included, completely free. Already have an account? Start a 7-day trial instead.
Free IG account + first month free, or 7-day trial • £97/month thereafter • Cancel anytime
Risk Warning: Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with IG. Leverage can magnify both gains and losses. Margin requirements vary by market and can change — always check current figures directly on the IG platform.