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Leverage

When you trade with leverage, you are essentially borrowing capital from your broker which only requires you to put up a small portion of the capital necessary to cover your market positions.

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Many investors are attracted to trading with leverage because it helps to enhance the potential for larger trading profits. Basically, leverage allows you to control a larger position in the market than you would normally be able to with limited capital.

When using leverage, you are essentially borrowing money from your broker. The funds you deposit into your brokerage account are known as margin which acts as a small down payment on the full amount of your market position. The broker will advance you the rest of the capital necessary to control your positions in the market.

For example, assume you are making a non-leveraged transaction with a broker and were looking to open a position of 100 shares of a company that is currently trading at $1,000 per share. You would need to have $100,000 worth of capital to fund this position. On the other hand, with a broker offering leverage and requiring a 10% margin, you would only have to put up $10,000 to control this same number of shares in the market.

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Although trading with leverage does provide more opportunity for larger profits, it does come with the more potential risk of larger losses. This is why Plus247 is powered by MT4 which provides you with numerous risk management tools that can help you to minimize your losses.

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