What Is 1:2 Leverage?

When traders talk about 1:2 leverage (also written as 2x leverage), they mean doubling their buying power with borrowed capital. At this ratio, every dollar you deposit controls two dollars in the market, a balance that increases both profits and losses by exactly 100%.

Many traders first come across 1:2 leverage because it sits at the lowest end of the multiplier scale, offering small borrowing power and a clearer view of how fees, margin, volatility and liquidation thresholds react. It is not “safe,” but the lower ratio makes it easier to understand how leverage changes risk.

At Leverage.Trading, we explain how leverage ratios work across forex, crypto, and derivatives, with calculators and guides that show the risks and potential rewards at each level. In this article, I’ll break down what 1:2 leverage really means, how margin requirements are calculated, and why this ratio is considered a balanced entry point for new traders.

Understanding 2x leverage helps traders judge whether they should even use borrowed capital at all. Most traders never need more than a low multiplier, and many stay with 1:2 or choose no leverage depending on their risk tolerance and strategy.

Key takeaway

• 1:2 leverage allows a trader to control a position twice the size of their margin deposit, while exposing that margin to liquidation twice as quickly.
• 1:2 leverage magnifies both gains and losses at the same rate. A small loss in price impacts the trader’s account twice as fast as trading without leverage.
• The margin requirement for a position with a 1:2 multiplier is 50%. Let’s say that you want to open a position worth $5000 with 2x borrowed money, then you need to deposit $2500.

What does 1:2 leverage mean?

When you are leverage trading with 1:2 leverage, it means that you borrow twice the amount of money that you have deposited in your trading account.

With a 1:2 ratio, it means that your profits and losses are increased by 100% as well as your trading fees where the fees and the losses compound risk twice as fast.

Another important factor to understand when using this ratio is that you will have a liquidation price at a distance of 50% from your entry price.

This happens because your 2x leveraged position is built by 50% of your margin capital and 50% borrowed money.

How experienced spot traders evaluate a 2x leverage

Traders who are already comfortable trading spot markets sometimes evaluate 1:2 leverage to observe how borrowed funds interact with volatility and fees.

Before doing so, it is essential to understand margin requirements, liquidation distance, and how the broker handles risk events. The goal is not bigger trades, but better risk control.

Then you need to select an amount of collateral capital as your initial investment. The collateral money will work as your margin when opening positions.

Your trading platform must let you select a 2x ratio before you start trading, otherwise, you might be getting in using too much borrowed capital immediately.

A trader should already know how to manage orders without assistance before touching leverage. If someone needs guidance to place stops or calculate position size, they are not ready to use borrowed capital.

Real-world example to show you what it means

One example of 2x leverage is crypto trading, where you can trade Bitcoin and other popular cryptocurrencies with a low ratio.

Let’s assume that you want to buy a Bitcoin contract worth $10,000 with 2x your initial capital, you would first have to deposit $5000 to be able to afford the margin requirement.

Another example would be trading forex with a 2x boost which in essence means that you can double your trade size.

For instance, a trader with an account size of $3000 would be able to open positions worth $6000 with a 1:2 ratio.

This is where margin requirements start becoming a thing

A margin requirement is the amount of money that a trader needs to deposit into his trading account to qualify for open positions.

Each ratio has its margin requirement and the margin requirement for a 1:2 multiplier trade is 50% or half the value of the trade.

This is the general idea of how much your margin requirement is, however, different brokers have different rules so always make sure that you read the fine print before starting to trade.

For example, let’s assume that you are trading with a 2x ratio and you want to open a position size worth $8000, then your margin requirement would be $4000.

Why do they call it different things?

The difference between 1:2 and 2x credit is the way that the ratio is expressed. Technically there is no difference between the two.

2x borrowed capital is expressed as a multiple of your investment and explains that you will be able to trade twice the size of your initial deposit.

The other version, 1:2, explains the ratio of the amount borrowed. It states that 1 half of the position will be borrowed money.

It doesn’t matter which way you prefer to write it as it will still explain how much money you are borrowing for the position.

Popular platforms that offer this kind of ratio

There are plenty of options for traders who are looking to trade with a 1:2 ratio, including crypto brokers that offer high margin, forex brokers, spread betting brokers, and options brokers.

Some of the most popular names are listed below:

1. BYDFi (crypto)
2. ByBit (crypto)
3. AvaTrade (forex)
4. Admiral Markets (forex)
5. IG (spread betting)
6. CityIndex (spread betting)
7. InteractiveBrokers (options)

Choosing a platform comes down to personal preferences but there are some important factors to oversee before starting.

Fees are a big part of how leverage brokers make money and are also a big issue for traders who like to trade big. Make sure that the broker doesn’t charge too much for opening trades.

Regulations and security go hand in hand and you should always make sure to choose a broker that has at least one government regulation.

Drawbacks

Using borrowed capital, even at a small 1:2 ratio, changes the way losses behave. That is the first reality traders must accept. If you come from spot trading, you are used to losing exactly what you risk, nothing more. With 1:2 leverage, losses are calculated twice as fast.

The main issue with 2x leverage is not “bigger trades.” It is how quickly your downside accelerates when your position moves against you. Stop-loss placement needs to be calculated with the liquidation distance in mind, not just a chart pattern or a random percentage. Even a small gap in price can cut straight through your margin if the order is poorly sized.

A second drawback is the fee. At 2x leverage, your position size doubles, and so do the trading costs tied to size. Execution, funding rates, and overnight fees become part of the equation. Many traders underestimate how much these costs eat into their margin buffer during a losing trade.

Lastly, even at this low ratio, liquidation remains a possibility. Not because the move is “big,” but because leveraged losses do not wait for you to react. You can still get wiped out pretty fast if you are not ready for a big market downturn.

Benefits

The main benefit of using a 2x ratio is the perfect balance between buying power and risk.

Some traders choose 2x leverage because it reveals how position size affects fee pressure and liquidation thresholds without using aggressive borrowing. The benefit is educational: it shows how quickly small losses can drain capital when the multiplier increases, even at the lowest level.

Let’s say that you want to trade a $10,000 contract in the forex market and you make a 2% profit.

This would normally give you a profit of $100, however, with a 2x ratio your profit is increased to $200.

1:2 leverage still carries liquidation risk, and traders must treat it with the same discipline they would at higher ratios. “Low leverage” does not mean low risk; it simply means losses slow down slightly before liquidation occurs.

Now some info you should know about losses

The biggest difference between trading the spot market vs the credit market is that at a ratio of 1:2, your losses are increased by 100%.

That is a pretty big step for someone who has never tried trading with borrowed money before and at first, it can come as a shock.

For example, if you deposit $2000 into your spread betting account and open a trade with a 2x credit line, your total trade size is $4000.

Now, if you lose 10% on that position, your total loss will amount to $4000 x 0.10 = $400.

This is a loss of twice the size of your initial investment and this is how leveraged losses work.

Comparing it to other ratios

When compared to other ratios, a 1:2 multiplier is the lowest ratio that can be used with borrowed money.

The next step down the ladder would be 1:1 margin and the next step up the ladder would be 1:3.

Higher multipliers such as 1:5 or 1:10 are typically used by advanced traders who already understand how funding, liquidation prices, fee scaling, and volatility interact. Ratios above 1:2 create far less reaction time if the market moves against the position.

Remember, each time you increase your multiplier, both your potential profits and losses are multiplied by the ratio you have chosen.

Your margin requirement and your liquidation price will also change and it is your job as the trader to keep an eye on all of these factors.

What you need to know about lot sizes at this level

The lot size is the number of units that you can trade with the capital you have in your trading account, the more money you have allocated to your account, the bigger the lot size you can trade.

When trading with a 2x ratio, your lot size is increased two times. This means that for every $1 you deposit into your trading account, you gain an extra $1 in lot size.

Lot sizing depends heavily on the market. In regulated FX markets, margin and contract structure follow strict standards. Crypto derivatives vary widely between exchanges, and contract types can behave differently due to funding rates, liquidity, or price indexing. Traders should not assume cross-market similarity.

Let’s say that you want to buy 10,000 units of an FX pair, with a 1 to 2 ratio you will only have to put up with half of the trade, which is 5000 units.

The other half will come directly from your broker. Keep in mind that leverage is always paid back to the broker once the trade is closed out.

And of course there are some big risks attached

Margin is the amount of money that you deposit in your trading account to access a borrowed purchasing power.

This also comes with two underlying risks, margin calls, and liquidation.

Should your trade move against you and the losses exceed close to the amount of margin you have put up to enter the trade, your broker will send you a margin call.

This is a warning from the broker telling you that you are running dangerously low on margin collateral. At this point, you can either close out the position or deposit more funds.

If you choose not to do anything and the market keeps moving against you to the point that you completely run out of margin capital, your account will get liquidated.

At a 1:2 ratio, the risk of a margin call and liquidation is much lower than if you were to trade on a higher ratio.

FAQ

Conclusion

1:2 leverage is a choice that many new forex traders and crypto traders choose to get the best of both worlds when it comes to profits and risk.

Many traders look at 1:2 leverage as a way to observe how margin reacts to volatility. It does not remove risk, and it does not guarantee controlled losses, because funding fees, liquidation thresholds, and rapid price spikes can override a stop order.

Any trader considering leverage should already be comfortable operating without borrowed funds and have a risk plan in place that protects against volatility and slippage.

It is important to have a solid trading strategy when leveraging any market and even if you are choosing a low ratio you need to both understand your market and have a good plan.

In this guide, I will explain the ins and outs of the 2x leverage ratio so you know what to expect.