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Leverage

Leverage in financial trading refers to the ratio of the amount used in a transaction to the required deposit. It represents the percentage or fractional increase that traders can achieve in their trading from the amount of capital they have available.


The concept of leverage allows traders to execute trades with notional values significantly higher than the capital they have. For instance, a leverage of 100:1 means that a trader can execute a trade with a notional value that is 100 times greater than the capital in their trading account.


Leverage is a popular tool among traders, as it enables them to amplify their potential profits. However, it is important to note that leverage also amplifies the potential losses, and therefore, traders need to exercise caution while using it.

In summary, leverage is a powerful tool in financial trading that allows traders to trade notional values far greater than the capital they have available, but it also comes with an increased level of risk.

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