Stock market basics
Leverage
Definition
Leverage means controlling a position larger than the cash you put up, using borrowed money or margin. At 50:1, $1,000 controls a $50,000 position, so a 1% move against you costs $500, half your deposit. Leverage magnifies losses as much as gains, as our guide to leverage and margin shows.
Example
Suppose you put up $2,000 and use 10:1 leverage to control a $20,000 position. A 3% rise adds $600, a 30% gain on your deposit, while a 3% fall costs $600, a 30% loss. A 10% move against you would wipe out the whole $2,000, before any fees.
Hypothetical numbers, for illustration only.
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