Glossary · Markets & Trading Mechanics

Leverage

Using borrowed capital to increase position size (amplifies both gains and losses).

Leverage means controlling a larger position than your cash alone would allow, usually by borrowing from a broker or using derivatives. Gains and losses scale up with the larger exposure.

That amplification is why leverage is risky for beginners: a small adverse move can wipe out a large share of your account, and you may owe more than you deposited in extreme cases. Many educators recommend learning without leverage first.

Example

With 2× leverage, a 5% drop in the underlying asset can translate to roughly a 10% loss on the capital you put up (before fees and interest).

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