Essential

Leverage

Using borrowed capital to increase the potential return of an investment. Amplifies both gains and losses.

Definition

Leverage allows traders to control a larger position with a smaller amount of capital. For example, 100:1 leverage means $1,000 controls $100,000 in the market. While leverage amplifies profits, it equally amplifies losses.

How It Works

100:1 leverage: $1,000 margin controls $100,000
50:1 leverage: $2,000 margin controls $100,000
Higher leverage = higher risk and reward
Margin is the collateral required

Types of Leverage

Forex Leverage

Often 30:1 to 500:1 depending on regulation

CFD Leverage

Varies by instrument (stocks, indices, commodities)

Crypto Leverage

Typically 2:1 to 100:1

Trading Tips

Regulated brokers have leverage limits (EU: 30:1 forex)

Start with lower leverage as a beginner

Higher leverage increases margin call risk

Related Terms

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