Using borrowed funds to increase a trading position beyond what cash alone could buy. In brokerage firms, leverage is used in the form of margin trading (where the margin is the minimum amount required to execute a trade utilizing leverage). Essentially, leverage is credit accrued by depositing a small amount of cash. Many laymen incorrectly believe that there is a substantially increased risk in using leverage. However, leverage allows traders to trade in markets that would otherwise by infeasible due to high costs. Trading using leverage doesn’t increase the risk. In fact, it provides the same risk as trading using cash alone.
Leverage
Market Terms
We don't know everything about the markets. We're just devoted to learning. Taken from those smarter than ourselves, here's how we define Leverage.