Leverage
Leverage of 1:100 means $1,000 of margin can control a $100,000 position. It amplifies both directions equally: a 1% market move becomes a 100% change in the margin backing it. Leverage does not create edge; it scales whatever edge — or lack of one — already exists.
High leverage interacts dangerously with position sizing mistakes. Most catastrophic retail losses are not caused by bad strategies but by position sizes that leverage made possible and a losing streak made fatal.
Covered in depth in Lesson 03: Risk management before anything else.
Related terms
- Margin — The deposit a broker locks as collateral while a leveraged position is open.
- Position sizing — Deciding how much to risk on each trade — the discipline that determines whether losing streaks are survivable.
- Margin call / stop-out — The broker's forced closing of positions when account equity can no longer support the open margin requirement.
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