By Stefano Treviso , Updated on: Oct 19 2022. Leveraged trading consists of trading with borrowed capital from your broker in order to enhance your buying power. When a broker gives you a leverage factor (multiplier) of 1:10, 1:20 or any other, they’re referring to the amount of times that you’re buying power is amplified to.
How much leverage does a broker offer?
The amount of leverage a broker offers depends on the regulatory conditions that it complies with, in any/all of the jurisdictions it is allowed to offer trading services in. With leveraged trading, the trader need only invest a certain percentage of the whole position.
What are the key takeaways of leverage?
Key Takeaways. Leverage refers to the use of debt (borrowed funds) to amplify returns from an investment or project. Investors use leverage to multiply their buying power in the market.
What are the pillars of leverage trading?
Coverage – This is the ratio of the net balance in your trading account compared to the leveraged amount. Margin – This is the amount required by your broker to cover possible losses should the trade become unfavorable. It is one of the pillars of leverage trading.
