Before you can even begin studying how to trade the Forex, you must first understand the “margin” in Forex. Margin is defined as the amount of money required in your account to place a trade using leverage. So, when determining your trade size (number of lots), you will need to consider the margin requirement for that particular trade.
As an example, if your brokerage firm requires a 2% margin and you want to buy or sell one standard lot ($100,000) at a leverage rate of 50:1, your calculation will look like this:
1 standard lot = $100,000
Therefore, the 2% margin required for this trade = 2% x 100,000 = $2,000
If you are able to obtain a leverage ratio of 50:1 for this trade, then your $2,000 deposit would allow you to control and manage trades up to $100,000. This is just simple leverage in forex meaning regarding ratios and margin, but there are plenty of other ratios available, e.g., 100:1, 200:1, 400:1.