WHAT IS Leverage?

Leverage is a powerful financial tool that allows traders to control a large position with a relatively small amount of capital. It amplifies both potential profits and losses by borrowing additional funds.

Let me explain with an example.

🧮 Scenario
Initial Capital: $1,000
Leverage Ratio: 10:1
Effective Trade Size: $10,000
If Asset Price Increases by 2% → Profit = $200
If Asset Price Decreases by 2% → Loss = $200
With 10:1 leverage, a 2% market move results in a 20% gain or loss on your actual capital.

💡 Additional Notes

Leverage increases both the reward and the risk. While it can magnify your gains, it can also lead to significant losses if not used responsibly. That’s why many funded trader programs and prop firms place strict rules on leverage usage.

Beginners are strongly encouraged to start with low leverage (e.g., 1:2 or 1:5) and gradually increase as they build experience and proper risk management discipline.

WHAT IS Leverage?

🧮 Scenario

💡 Additional Notes