Definition of Leverage
A mechanism that allows you to control a larger position with a smaller amount of capital. Expressed as a ratio (e.g., 1:100 means $1,000 controls $100,000). Leverage amplifies both profits and losses.
At a glance
Term
Leverage
URL slug
leverage
Category
Risk & capital
Short answer
A mechanism that allows you to control a larger position with a smaller amount of capital.
Deep dives
/guide/what-is-leverage/, /guide/what-is-margin/, /blog/how-to-trade-with-leverage-step-by-step/
Example
Example: $1,000 equity and 1% risk = a $10 cash cap. Size from “Leverage” and stop distance, not from a gut-feel lot size.
Common mistake
Common mistake: confusing “Leverage” with advertised max leverage — leverage alone does not set risk per trade.
Professional tip
Tip: write a cash daily loss limit independent of “Leverage”, then let the definition set size only inside that ceiling.
Related deep dives
Practice tools:
Related terms
FAQ
A mechanism that allows you to control a larger position with a smaller amount of capital.
“Leverage” sits inside capital protection. Ignoring it turns leverage and margin from tools into a path to rapid loss.
Common mistake: confusing “Leverage” with advertised max leverage — leverage alone does not set risk per trade.