Leverage
a.k.a. Gearing
Borrowed buying power from your broker that lets you control a big position with a small deposit, magnifying gains and losses.
Leverage lets you control far more money than you put down. At 50:1, every 1 dollar of your own controls 50 dollars in the market. Your broker fronts the rest, holding a slice of your cash as margin.
Here is the brutal bit: leverage does not care which way the market moves. A 1% move in your favour on a 50:1 position is a 50% gain on your deposit. A 1% move against you is a 50% loss. Same crowbar, both directions.
Leverage is a tool, not free money. Use less of it than you are offered, size your lots from your risk, and always know where your stop-loss sits. Many traders blow up not from bad ideas but from too much leverage.
50:1 leverage on $1,000
- Deposit: $1,000. Leverage: 50:1.
- Maximum position: $1,000 × 50 = $50,000.
- Price moves 1% in your favour: +$500 (50% of your deposit).
- Price moves 1% against you: −$500 (half your deposit gone).
Bottom line: A 1% wiggle on the chart became a 50% swing in your account.
Using all the leverage the broker allows because it is "available". Higher leverage just means a smaller move can empty your account.
Keep this word for good
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