Products & markets
Leverage
Leverage lets you control a position bigger than your capital. It amplifies gains and losses alike.
Leverage lets you control a position bigger than your capital. It amplifies gains and losses alike.
Leverage means trading with money borrowed from your broker. At 5:1 leverage, $1,000 lets you control $5,000 of assets. If the price rises 2%, your gain is calculated on $5,000, not $1,000: it is multiplied.
The trap is that losses are multiplied the same way. An adverse move can wipe out your capital far faster than without leverage, and trigger a margin call. It is a powerful tool that demands flawless risk management; misused, it is the most common cause of blown accounts.
With $1,000 and 10:1 leverage, you control $10,000. A 3% rise earns you $300 (30% of your capital). But a 3% drop loses you $300 just as fast.
Understanding a term is good. Applying it on a real platform with a clear method is better. That is exactly what we do in 5 days.