Leverage and risk are not the same thing

[Shadow Trader]

Leverage gets blamed for blown accounts, but leverage alone doesn't create risk. Position size relative to account size does.

Consider two traders with a 10,000 dollar account. One trades 1 lot with a 10 pip stop on EURUSD, risking about 100 dollars, or one percent. The other trades the same 1 lot with the same stop. Their risk is identical, whether leverage is 30:1 or 500:1. The difference is how much margin the broker locks up.

High leverage becomes dangerous when it lets a trader open positions far bigger than the account can bear. Low leverage can protect by making oversized positions impossible, which is why some regulators cap it.

The practical rule: decide the risk in money terms first, from stop distance and account size, then compute the position size. Leverage is simply the permission slip, and the risk rule should come first.

How is position size calculated: from risk and stop distance, or from whatever margin allows?