07/08/2026

10 min read

Margin trading on stocks: How to use leverage on securities

Imagine being able to take a larger position in stocks without paying the entire purchase price upfront. That’s exactly what leverage makes possible: it allows you to increase your market exposure with a smaller amount of your own money. But this cuts both ways - where potential returns are amplified, losses are equally magnified when prices fall. With margin trading in particular, losses can exceed your initial investment. In this guide, you’ll learn how leverage works with stocks, which leveraged products exist and what risks to be aware of.

Explanation: Whether through the use of margin or derivative leveraged products, leverage magnifies both your profits and your losses proportionally when trading stocks - your capital investment is the only variable you actively control.
Larger market exposure: Leveraged products such as warrants, futures or certificates allow you to take a position in the underlying asset that is larger than your own funds alone would allow. This also means that any adverse price movement has a proportionally larger impact on your capital.
High risk, high speed: With certain leveraged products, your total loss may be limited to the capital invested. With margin trading, however, losses can exceed your collateral if the market moves sharply against your position.
For beginners: Trading stocks with leverage requires experience. Tools such as stop-loss orders and careful position sizing can help reduce certain risks, but they cannot eliminate the risk of loss.

Simply explained: What are leverage and margin trading in stocks?

A leveraged product allows you to gain exposure to a large market position with a smaller amount of your own money. You put up part of the value yourself, while the rest is financed through borrowing. As a result, any price movement in the underlying asset has a larger effect on your invested capital - both gains and losses are amplified.

Leveraged stock trading may appeal to experienced investors who seek increased market exposure. However, the risk grows at the same rate as the potential reward: you only benefit from the leverage effect if the price moves in the predicted direction; otherwise, losses can accumulate just as quickly and may exceed your initial outlay in the case of margin trading

A special form of leveraged trading is margin trading where you borrow to buy real securities and only put up part of the purchase price yourself. Your invested capital and the securities you buy serve as collateral for the loan. In everyday language, stock leverage is usually associated with derivatives such as warrants, futures, knock-out certificates or CFDs - contracts where you don’t actually own the stock itself. With margin trading, however, you are the actual owner of the shares, though they are pledged as security until you repay what you borrowed.

At Bitpanda

Bitpanda does not offer CFD trading. Instead, you can buy stocks using margin trading - you borrow E-Tokens (EURCV) from Bitpanda GmbH to finance part of a buy order, and you become the real owner of the shares you purchase.

How does leverage work with stocks?

The exact mechanism depends on the leveraged product, but the basic principle is always the same:

You contribute a certain amount as capital investment and the issuer or platform finances the rest.
The underlying asset, in this case the stock, moves in the market and your profit or loss is multiplied by the leverage factor.
A small movement in the underlying asset leads to major changes in your capital.

Many leveraged products also include a so-called threshold (stop-loss or knock-out level). If the price of the underlying asset reaches this threshold, your position is automatically closed. While this limits further losses, it also locks in the loss already incurred and ends your position.With margin trading, forced liquidation does not guarantee that all borrowed amounts and fees are covered — you may still owe a remaining balance.

Are there leveraged ETFs as well? Yes, you can also trade entire markets with leverage by investing in leveraged ETFs. These ETFs multiply the daily performance of an entire index.

Examples of leverage with stocks

To understand how leveraged products work in practice, let’s look at three realistic scenarios based on the price behavior of the underlying asset:

Scenario 1 – Profit scenario:

You invest €5,000 in a stock. With 5x leverage, you gain exposure to securities worth €25,000. If the price of the underlying asset rises by 10%, you achieve a 50% return on your investment (5 x 10%). That equals a gain of €2,500. Your total capital grows to €7,500. Keep in mind: the same math works in reverse - a 10% price drop would mean a 50% loss on your investment.

Scenario 2 – Loss scenario:

The same scenario, but the price falls by 10%. The leverage effect now works against you: you lose 50% of your investment (5 x 10%). That equals a loss of €2,500. You are left with only €2,500 of your original capital.

Scenario 3 – Total loss (knock-out):

You invest €5,000 with 10x leverage. If the stock falls by just 5%, the knock-out threshold is triggered. Although your calculated loss would initially amount to only 50% (10 x 5%), the position is liquidated immediately to prevent further losses. The result: your entire €5,000 investment is gone.

Why does this happen? The threshold acts as a safety anchor. It ensures that the position is closed while your capital is still sufficient to cover the market movement. The higher the leverage, the closer this threshold sits to the current market price, and the faster a small pullback can lead to a total loss.

What types of leveraged stocks can you buy?

There are various leveraged products available on the financial markets. Each works differently and comes with different fee structures and risks. Here is an overview of common leveraged products - note that Bitpanda does not offer these derivative products; they are explained here for educational purposes only:

Warrants belong to the group of derivatives. A derivative is not an independent tangible asset like a stock, but rather a financial contract whose price is derived directly from another asset. In this case, the relationship between stocks and derivatives is simple: the stock is the underlying asset and the warrant is the bet on its price development.
How it works: A warrant gives you the right, but not the obligation, to buy (call) or sell (put) a specific stock at a predetermined price. Since you are not buying the stock itself but only the right to it, your capital investment is much lower - this creates the leverage effect.
Important to know: The value of this derivative depends not only on the stock price, but also on volatility and the remaining term. The closer the expiry date approaches, the faster the warrant loses value if the target price is not reached.
represents an obligation. It is a forward contract in which you make a binding agreement with a counterparty to buy or sell a stock at a fixed price on a specified future date.
How it works: Since the transaction is settled in the future, you do not have to pay the full purchase price today. Instead, you deposit only collateral, the margin. This creates the leverage effect.
Important to know: Futures are standardized and highly liquid. However, because they are binding obligations, there is theoretically a margin call risk during extreme market movements if your deposited capital is no longer sufficient to cover the losses.
A knock-out certificate is a very direct derivative. Its value is derived almost 1:1 from the stock’s price movement, but it is multiplied by a fixed factor, the leverage.
How it works: This instrument has a built-in knock-out threshold. If the stock touches this price even for a fraction of a second, the certificate immediately becomes worthless and the position is closed.
Important to know: Your maximum loss is limited to the capital invested. In return, the structure is much simpler compared to warrants, as factors such as the remaining term play only a minor role here.
CFD stands for “Contract for Difference”. This is also a derivative in which you enter into an agreement with a broker.
How it works: You never own the stock at any point. You are simply speculating on the difference between the purchase and sale price. If the stock rises, the broker pays you the difference. If it falls, you pay the broker the difference.
Important to know: CFDs often allow high leverage, but they are also less transparent.

Bitpanda does not offer CFDs. Instead, Bitpanda offers margin trading on securities. This means you borrow E-Tokens (EURCV) from Bitpanda GmbH to buy real stocks, ETFs or ETCs. You actually own the securities you purchase, although they are pledged as collateral until you repay what you borrowed. Both gains and losses are amplified by the leverage factor.

What are the opportunities and risks of stock leverage?

All leveraged stock products come with two sides to the coin. On one hand, leveraged products can offer significant opportunities, while on the other hand the risks are proportionally higher:

Opportunities

Higher return potential: With a relatively small capital investment, you can achieve amplified returns if the price develops as expected. However, the same amplification applies to losses if the price moves against you.
Direct market access (margin): By financing your position through the broker, you trade the underlying asset directly. With stocks, this means you may receive dividends and retain voting rights. Note, however, that you are also taking on the obligation to repay borrowed funds regardless of how the position performs.
Strategic flexibility: Leveraged products can be used for short-term speculative strategies. However, the short-term nature also means that positions can quickly move against you, and costs such as daily fees reduce your returns the longer you hold.
Fast responsiveness: You can open or close positions quickly in response to market movements. However, rapid price changes can also trigger margin calls or forced liquidation before you have time to react.

Risks

Accelerated loss risk: If the market moves against you, leverage multiplies your losses and reduces your capital much faster.
Risk of total loss and beyond: If a knock-out threshold is reached, your entire investment can be lost within moments. With margin trading, losses can exceed your initial investment, meaning you may owe more than you originally deposited.
Market volatility: Strong price fluctuations can close your position prematurely, even if the long-term trend matches your prediction.
Psychological pressure: The high dynamics of leveraged stocks often lead to emotional mistakes or rushed decisions under pressure.

Who are leveraged stocks suitable for?

Stock leverage and the underlying leveraged products are not suitable for every investor. They carry significant risks, including the possibility of losing more than your initial investment. They require experience, discipline and a thorough understanding of the risks involved. If you choose to use leveraged products, you should meet the following requirements:

Market understanding: You know how to invest in stocks and which factors influence the stock market.
Active time management: Since profits and losses accelerate, this instrument is suitable for people who can closely monitor market movements.
Strategic discipline: You use risk management tools such as stop-loss orders and determine your position sizes rationally instead of making emotional decisions.
Resilience: Leveraged positions can experience sharp and sudden swings. You need the composure to manage these situations calmly, and you must be genuinely prepared to accept losses — including losses that may exceed your original investment in margin trading.
Understanding ownership and obligations: With margin trading, you own the underlying shares, which means you may receive dividends and retain voting rights. However, those shares are pledged as collateral, and you cannot freely transfer or withdraw them until you have repaid the borrowed amount and all accrued fees in full.

A tip for getting started: Beginners should first become familiar with market dynamics without using leverage. Understanding what it means to invest money forms the foundation for healthy risk awareness. Even experienced investors should start with lower leverage levels and only commit capital they can afford to lose entirely.

Margin trading at Bitpanda: Trade from stocks to crypto with leverage

Depending on whether you want to trade securities or speculate on cryptocurrency price differences, Bitpanda offers a way to use leverage strategically:

Bitpanda Margin Trading (Leverage on assets)

Margin trading is the method that allows you to apply leverage to crypto assets and securities on Bitpanda. You borrow E-Tokens (EURCV) from Bitpanda GmbH and use them together with your own funds to buy stocks, ETFs or ETCs.

You borrow E-Tokens (EURCV) from Bitpanda GmbH in order to open a larger position in securities or cryptocurrencies.
The securities you buy are pledged to Bitpanda GmbH as collateral. You must also pledge additional assets (such as E-Money or crypto assets) as extra security.
Depending on the asset, you can choose leverage between 2x and 10x for your strategy.
Bitpanda monitors your margin level in real time and sends you warnings (margin calls) before your position reaches the liquidation threshold. If the threshold is reached, your position is automatically sold.
Bitpanda Margin Trading gives you access to +875 securities, including stocks, ETFs and ETCs, and +1000 assets for Margin Trading overall.
You pay no buy fee when opening a margin position, but a €1 sell fee when closing it. Daily fees are charged on the borrowed amount every 4 hours, which reduces your returns over time.

Ready to amplify your trades? Start now with Bitpanda Margin Trading.

Start trading with leverage

Conclusion: Margin trading and the correct use of leverage with stocks

Leverage on stocks is a tool for experienced individuals. If you understand how market movements work, take risk management seriously and begin with lower leverage, leveraged products can provide a way to take on larger positions with less capital. However, the potential for amplified losses, including losses that exceed your initial investment in margin trading, means that leverage should be approached with caution.

Discipline is the most important basic requirement: without a clear strategy, the use of stop-loss orders and experience within market environments, the disproportionate effects of leverage can quickly lead to losses. Always trade with the awareness that leverage works in both directions.

If you want to apply leverage to securities instead of derivatives, margin trading is your path. At Bitpanda, you borrow E-Tokens (EURCV) to buy real shares, you become the owner of those shares, though they are pledged as collateral until you repay the borrowed amount and all accrued fees.

Would you like to dive deeper and understand how to successfully build your portfolio using different asset classes? In the Bitpanda Academy, you’ll find suitable guides that explain the fundamentals of securities and show you how to build long-term wealth with stocks and ETFs.

FAQ

Frequently asked questions about leverage with stocks

Below, we answer the most common questions about leverage with stocks.

Leverage amplifies the effect of price movements on your invested capital. While a normal price increase of 10% would only slightly affect your portfolio, 10x leverage would amplify that movement tenfold on your invested capital. The same applies in reverse: a 10% decline with 10x leverage would result in a 100% loss of your investment. With margin trading, losses can even exceed the amount you initially invested.

Stocks/ETFs/ETCs transactions are provided on an execution-only basis by Bitpanda Financial Services GmbH without investment advice. Investing involves risk of loss, and past performance is not a reliable indicator of future results.

Margin Trading and borrowing E-Token are provided by Bitpanda GmbH as an unregulated service. Margin trading involves borrowing E-Token (EURCV) to amplify potential gains and losses when investing in Stocks/ETFs/ETCs. For each Stocks/ETFs/ETCs margin trade, you pledge the acquired Stocks/ETFs/ETCs and additional assets, including E-Money and crypto assets, as collateral to Bitpanda GmbH. Small price movements in the relevant Stocks/ETFs/ETCs may trigger margin calls or liquidation.

Risk beyond total loss: You can lose all pledged assets and still owe borrowed EURCV, including daily fees. Daily fees accrue every four hours, reducing returns and affecting your margin level. Margin trading is suitable for experienced customers only. Make sure you understand the risks of margin trading and the risks associated with financial instruments, including volatility and total loss. Do not enter into a margin trade if you cannot afford to lose your investment or to repay borrowed funds and daily fees. Consider your personal circumstances and, where appropriate, seek independent advice.