Financial Leverage Assets/Equity: An Overview of Forex Trading

4 min read

Financial Leverage is an important tool utilized in Forex trading that can greatly amplify a trader’s capital. This allows traders to make larger profits than what would be possible with only the capital that they’ve invested. Leverage is a loan provided by your broker that allows you to enter positions that are larger than the capital you have available. This loan is secured by the capital that you have in your trading account. This way, it is the trader’s responsibility to manage the trade to ensure that the amount of leverage used remains within acceptable levels. It is important to remember that while leveraging has the potential to supercharge investors’ returns, it can also amplify the returns in the negative direction as well. Thus, one should always be aware of the risks associated with leverage and monitor positions accordingly.