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Leverage definition
Leverage is the use of margin from a broker to control a position larger than your own deposit would allow. It applies across forex, stocks, commodities, indices, crypto, futures, and CFDs.
Leverage is written as a ratio, such as 1:10, 1:50, or 1:100. A 1:10 ratio means USD 1 of margin controls USD 10 of market exposure.
Leverage is not the same as margin: margin is the deposit you put up, while leverage is the multiple of exposure that deposit controls. Because profit and loss are calculated on the full position rather than the margin, leverage enlarges both, so traders contain the risk with smaller position sizes, stop-loss orders, and spare free margin. Available ratios depend on the entity and its regulator, and most retail traders lose money on leveraged products.
Leverage Example
You have USD 1,000 and trade at 1:10 leverage.
This controls a position worth:
USD 1,000 √ó 10 = USD 10,000
If the position rises 5%, the USD 500 gain is calculated on the USD 10,000 exposure, not the USD 1,000 deposit. If it falls 5%, the USD 500 loss is calculated on the same full exposure.
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