How Much Leverage Should a Beginner Use? Let Your Stop-Loss Decide

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Why leverage is a number you read off your position size, with Singapore’s retail margin floors

Published: 16 October 2026 · Last updated: 16 October 2026 · By Spencer Li, CFTe

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Picture 2 beginners who open accounts with the same broker on the same day. Both are offered the same leverage. One uses all of it on her first trade, and the other barely touches it. A month later, only one of them still has an account worth talking about, and it is rarely the one who used more.

So how much leverage should you use? Less than you think, and you should not pick the number directly at all. Start with how much of your account you are willing to lose on one trade, then the distance to your stop-loss, and let those two decide the position size. The leverage is whatever that position works out to. With a sensible risk per trade and a stop that gives the trade room, it comes out low, and in the worked examples below it never goes above 2 times the account. The maximum your broker allows is a ceiling for emergencies, and it tells you nothing about what is safe.

Below is the arithmetic, what each level of leverage can survive, and the limits Singapore sets for retail traders.

What is the difference between available leverage and the leverage you use?

When a broker says you can trade at 20 to 1, that is the most it will lend you. It says nothing about how much you should borrow. If you need a refresher on how margin and leverage ratios work, our post on what leverage is, with a forex example covers the basics.

The number that matters is your effective leverage: the total value of all your open positions divided by the money in your account. Say you have 10,000 in the account and hold positions worth 30,000. Your effective leverage is 3 times, whatever the broker would have let you do.

That number tells you something very plain. It is how many percent your account moves for every 1% the market moves.

At 20 times, a 5% move against you is the whole account. Stock indices can move 5% in a bad week, and a single stock can do it overnight on one piece of news, so at that level you are one ordinary headline away from starting again. That is the table’s real message: high leverage turns ordinary market noise into a matter of survival.

How do you work out the right leverage from your stop-loss?

Here is the method I call the Leverage Readout, because you read the leverage off at the end instead of dialling it in at the start.

1. Decide your risk per trade. For example, 1% of a 10,000 account is 100. Our post on the 2% money management rule explains how to choose this number.
2. Find the distance to your stop. This comes from the chart, from the point where your trade idea is proven wrong. Say it is 2% below your entry.
3. Divide. The position size is the risk divided by the stop distance, so 100 divided by 2% is a position worth 5,000.
4. Read off the leverage. A 5,000 position on a 10,000 account is 0.5 times. You did not need to borrow anything.

Now change only the stop. A forex trade with a stop 0.5% away gives a position of 20,000, which is 2 times. A wide stop 10% away gives a position of 1,000, which is 0.1 times. In all three cases, if the stop is hit, you lose the same 100.

That is the point worth sitting with. Your loss on a trade is set by your risk per trade and your stop, and the leverage just follows. Traders who blow up usually run it the other way round. They pick a big position because the leverage is available, and then the stop has to be squeezed so tight that ordinary noise knocks them out, or it is left off altogether.

Setting that stop well is its own skill, covered in Entry, Stop-Loss and Target: How to Set All Three.

Our free 15-Minute Swing Trader’s Checklist walks through the stop and the size before every trade, so the leverage takes care of itself. Get the free checklist →

Does the leverage add up across trades?

Yes, and this is where many beginners get caught. Five positions at 1 times each is 5 times in total, and if they are all in stocks that move together, they will all lose together in a sell-off.

So check two numbers before adding a trade. The first is the risk on this one trade. The second is the total value of everything open, divided by your account. If a broad market drop of 10% would cost you half your account, the individual trades may each look careful, and the book as a whole is not.

What leverage can a retail trader get in Singapore?

Singapore sets a floor on how much margin a licensed broker must collect from retail customers on CFDs, which caps the leverage. The rule sits in the Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licences) Regulations, Fourth Schedule, Table 18.

Even the lowest of those ceilings is far more than the arithmetic above calls for, because a trader risking 1% with a stop that gives the trade room rarely needs more than a small part of it. If you want to know how CFDs themselves work, our post on understanding CFDs explains the product.

What can go wrong even with a stop-loss?

Three things, and each one gets worse as leverage rises.

Gaps. A stop-loss becomes a market order when it is hit, so if the market opens well past your stop, you are filled at the opening price. At 1 times, a 5% gap through your stop is an annoyance. At 20 times, it can be the account.

Margin calls. If losses push your account below the broker’s maintenance level, the broker can ask for more money or close your positions for you, at whatever price is available. The exact levels differ by broker, so read your own broker’s margin page before you trade.

Financing costs. Leveraged positions held overnight, such as CFDs, usually carry a daily financing charge. On a swing trade held for weeks, that cost eats into every result, win or lose.

None of these are rare events. Over a few hundred trades you will meet all three, and the amount of leverage you were carrying on that day decides whether it was a bad week or the end of the account. The maths of that is in Risk of Ruin: How to Work It Out.

Take a minute to add up your effective leverage across everything you hold right now. And if the market opened 5% lower tomorrow, how much of your account would still be there by lunchtime?

FAQ

How much leverage should a beginner use?

As little as your position sizing calls for, which is usually far below what the broker offers. Size each trade from your risk per trade and your stop distance, and treat the leverage as the result rather than a setting.

Is 1:100 leverage good for beginners?

It is far more than a beginner needs, and in Singapore a licensed firm cannot offer retail customers more than 20 to 1 on forex CFDs under Table 18. At 100 to 1, a 1% move against you is the whole account.

What is effective leverage?

Effective leverage is the total value of all your open positions divided by the money in your account. It tells you how many percent your account moves for every 1% the market moves.

Does using a stop-loss make high leverage safe?

No. A stop-loss caps the planned loss, but a gap past the stop fills at the next available price, and with high leverage that gap can be larger than your account.

What is a margin call?

It is your broker asking for more money because losses have pushed your account below its maintenance level. If you do not add funds, the broker can close your positions for you.

Go deeper

This post sits under our guide to money and risk management. If you would like the routine that fixes your stop and size before every trade, the free 15-Minute Swing Trader’s Checklist is the place to start. Enter your email and we’ll send it over:

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About the author. Spencer Li is the founder of Synapse Trading and a Certified Financial Technician (CFTe). His trade log is public: every trade since April 2024, dated, losses left in.

Educational content only, not personalised financial advice. Trading carries risk, including loss of capital. Past performance is not indicative of future results. Synapse Trading is not licensed or regulated by MAS.

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