Leverage allows traders to control a larger position size with a smaller amount of capital.
In simple terms, it’s a ratio that shows how much your position is multiplied compared to your account balance.
For example, with 1:100 leverage, you can control a $100,000 position using just $1,000 of your own funds.
Leverage gives traders the ability to maximize potential profits, but it also increases potential losses, since both gains and losses are calculated on the full position size - not just on the margin used.
Example
If your account balance is $1,000 and you use 1:50 leverage, you can open a position worth $50,000.
A 1% price movement in your favor would generate a $500 profit - but a 1% move against you would also result in a $500 loss.
This demonstrates both the power and risk of leveraged trading.