Leverage 101: The Beginner Guide to Trading With Borrowed Capital

Leverage allows traders to open positions much larger than their actual account balance by borrowing capital from the broker. A 1:100 ratio means $1,000 can control a $100,000 position.

This is powerful, but it's a double-edged sword: the same multiplier that boosts profits also magnifies losses just as quickly, sometimes wiping out an account in minutes during volatile sessions.

Beginners are encouraged to start with low leverage ratios and only increase exposure once they fully understand margin requirements and how quickly losses can accumulate against an under-funded account.