Leverage
Trading a position much bigger than your account, using a small deposit called margin.
With 1:100 leverage, $1 of margin holds $100 of position. Profit and loss come from the full position, not from the margin. The leverage you really use is your position value divided by your account. A high maximum only means you are allowed to take bigger risks.
Related terms
Explained in these lessons
- Why most retail traders lose money
- Leverage in plain words
- 5 gold trading mistakes that drain accounts
- How to calculate your lot size
- Investing, trading and gambling: what is the difference?
- Index funds and ETFs: what you actually own
- Why crypto prices swing so hard
- Crypto futures and leverage: how liquidation works