Macroeconomics & Investing · Entry 24 of 71

What is Leverage?

Amplifying trading power with borrowed capital

Core Definition

Leverage is a strategy using borrowed capital to increase potential return on investment. It allows traders to control a much larger market position with a small amount of their own money, acting as a multiplier for both profits and losses.

Key Warning

While leverage amplifies gains when trade directions are correct, it equally magnifies losses when prices move against you.