Effective leverage
Effective leverage is the ratio between your total exposure and your capital: the leverage you really use, not the one your broker offers.
Your broker may offer 30:1, but if you open a €10,000 position on a €10,000 account, your effective leverage is 1:1. Conversely, stacking several positions can push you well beyond what you think.
Calculate it by adding up the notional value of all your open positions and dividing by your equity. On correlated pairs such as EUR/USD and GBP/USD, your dollar exposure adds up.
High effective leverage leaves your account exposed to a gap or a release, even with stops. Many experienced traders stay below 5:1 or 10:1 overall. Check this figure before adding any new position.
See also