Leverage

Leverage

Leverage is the use of various financial instruments or borrowed funds, such as margin, to increase the potential return of an investment. Leverage is a double edge sword and can be considered dangerous weapon because traders add bigger position sizes without actually owning the funds to cover potential losses. But it also can be a very powerful tool if it has been utilized to increase the investments power as long as traders have efficient money and risk management plans associated with it.
For Example: in order to trade 100,000 units of EUR/USD. Traditionally, traders need to have 100,000 US dollars physical owned money or we say 1:1 leverage. But with 100:1 leverage, traders are only required to deposit 1/100 of the nodded amount which is equivalent to 1,000 US dollars.

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