Leverage does not create profit
One idea that should be settled before you open a single position: leverage determines how much margin is required. It does not determine how much you make.
The arithmetic
At 1:500, the margin on a 0.01-lot gold position — with gold at $4,300 an ounce — is roughly nine dollars.
Leverage was never the constraint. The constraint is your capital and the risk you accept per trade.
What actually determines your returns
- How much you risk per trade
- How many trades you take
- Your average R — what you make relative to what you risked
Leverage determines none of the three.
So why does it destroy accounts?
Because it removes the physical brake. When the required margin is nine dollars out of a thousand, nothing stops you opening a position ten times larger than it should be. High leverage does not increase your profit; it permits you to risk more than you should.
This is the most common reason small accounts are wiped out. Not bad luck and not a bad system — a position size the capital cannot absorb, made possible by leverage that looked like a gift.
The working rule
Decide your risk as a percentage of the account first, then calculate the position size that delivers it, then confirm the margin is available. Not the other way round.
Leverage does not appear in that equation at all — which is exactly the point.