Leverage is a tool that allows you to open positions larger than the amount of your own capital on the account. To put it simply, a broker provides you with borrowed funds to be able to open larger positions.
Please be aware that these funds are not added to your account.
Leverage of 1:100 means that for every $1 of your own money, you can control a position worth $100.
With leverage of 1:500 — for every $1 you can control $500.
Example
You have $1,000 on your account. With 1:100 leverage, you can open a position of up to $100,000.
Profit and loss are calculated on the full position size ($100,000), not just on your $1,000.
Where it is used
Leverage is applied when trading:
• currency pairs (Forex)
• CFDs on indices, stocks, commodities, cryptocurrencies and other instruments
Important risks to understand
Leverage amplifies both potential profits and potential losses.
Even a small price movement against your position can result in significant losses or forced closure of positions (Margin Call / Stop Out).
Use leverage responsibly, control your position size, and always consider the level of risk you are prepared to take.