GlossaryAdvanced
Leverage
Using borrowed funds to increase the size of a position beyond your own capital.
Leverage means using borrowed funds to control a larger position than your own capital alone would allow, which magnifies both potential gains and potential losses.
Because losses are also magnified, a leveraged position can lose money, and even be liquidated, faster than an equivalent position without leverage, especially in a volatile market.
Examples
- Using 5x leverage means a position is five times larger than the trader's own posted capital.
- Leverage increases risk, which is why it's generally considered unsuitable for beginners.