How margin is worked out
Margin = position value ÷ leverage. The position value is lots × contract size × price, in dollars. Example: 0.10 lot of gold at 4,000 is 10 ounces × $4,000 = $40,000. At 1:100 leverage the broker holds $400 as margin.
Margin is not risk
Higher leverage lowers the margin, but it does not lower what you lose when price moves against you: that depends on the lot size and the stop (see the lot size calculator). Leverage only makes it easier to open positions that are too big. Many regulators cap leverage for retail traders (for example 1:30 on major pairs and 1:20 on gold in the EU and UK).
Margin level
Margin level = equity ÷ used margin × 100 %. If it falls to your broker's margin-call or stop-out level (often 100 % and 50 %), positions are closed for you. Keep it high by trading small.
Questions
How much margin for 0.01 lot of gold?
0.01 lot is 1 ounce. At 4,000 and 1:100 leverage that is $40 of margin.
Is 1:500 leverage dangerous?
Leverage itself only sets the margin. The danger is the bigger lot sizes it allows. With a sensible lot size the result is the same at 1:100 or 1:500.
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