Definition and examples

The plain simple definition of leverage:

Leverage uses:

The idea of leverage defines that when I would like to trade with only a $1000 account, the company:

Buying an asset is:

If we trade without leverage with the $1000 balance, a 1% profit would add:

The company tells me I can trade, buy or sell assets of $100,000 with my $1000 account. This means that I can take $100,000 of investments, and in this case, if I have 1% of movement toward my expectation, then the profit equals:

When we use leverage, we won’t only increase the profit potential but also pump the risk by the same multiplier:

Before using particular leverage, we must define the following:

Once you’re involved in the profit potential, you’re not paying attention to the risk potential, which is very logical human behaviour:

Lowering the leverage to a logical value will not allow us to carry profitable trades and a healthy psychological relationship when we decide to trade: