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Leverage

In one line: Trading with borrowed money, so a small deposit controls a bigger position. Gains and losses both get bigger.
Watch: 1% vs 10% Risk, No Setup, and 100x Leverage Explained · open on YouTube · 1-minute Short

Leverage is a magnifying glass for money. With 10:1 leverage, 100 of your own money controls a position worth 1,000. A 1% move in the price is then a 10% move on your money. In both directions.

The SECThe US stock market regulator. describes leverage as using borrowed money to increase the potential return, which also increases the potential loss.

In the EU, ESMA limits leverage on CFDsBetting on a price change without owning the asset. for retail clientsAn ordinary individual investor, not a professional.. These are the caps it set in 2018: 30:1 for major currency pairs. 20:1 for non-major pairs, gold and major indices. 10:1 for other commodities and non-major indices. 5:1 for individual shares. 2:1 for crypto. See Margin and CFDs (contracts for difference).

Note: leverage changes how much margin you need, not how much you lose if your stop is hit. That loss is set by position sizeHow much you buy or sell in one trade. × stop distance, see Position sizing.

Example (illustration, no stamp)
Worked example (round numbers, not advice): 1,000 deposit × 10:1 leverage = 10,000 position. A 2% price drop = 200 loss = 20% of the deposit.

Related

Sources & studies

  1. Investor.gov (SEC): Leverage
  2. ESMA: ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors
  3. Investopedia (secondary): Leverage

Trading termsMarginCFDs (contracts for difference)

Last checked: 2026-11-04 · Educational, not financial advice.

Education only, not financial advice. No signals. Backtests are hypothetical: real trading can be worse. Past results don't predict future results.