What is Leverage in Trading?

Leverage in forex trading allows a trader to control a position that is larger than the amount of capital set aside as margin. For example, 

• With “10:1” leverage, a trader may control a ₹10,000 position with ₹1,000 of margin, subject to the broker’s terms.

However, note that leverage does not remove the trader’s exposure to the full position size. If the ₹10,000 position moves against the trader, the gain or loss is based on the position’s price movement (not only on the ₹1,000 margin).

Therefore, leverage in forex trading can increase both potential gains and potential losses relative to the trader’s own capital. If losses reduce the account’s available margin below the required level, the broker may close positions under its margin rules.

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