What is Leverage?

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Leverage is a gear or a multiplier required to open a position bigger than your deposit. In online forex/CFD trading leverage is the credit that a broker provides to a trader to increase the trader’s open position and correspondingly the trader’s Profit & Loss (P&L).

Example: Sam deposits 1000 USD into his account. Sam’s broker provides him with a 1/100 leverage. The maximum position Sam can open equals his deposit multiplied by his leverage = 1000 USD x 100 = 100,000 USD. Sam’s P&L is correspondingly multiplied by 100.

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