What is leverage? How does it work? Why is less money required for a higher leverage and is the risk higher? | FXlinked

What is leverage? How does it work? Why is less money required for a higher leverage and is the risk higher?

Leverage is the multiplication of your balance. This allows you to open bigger trading positions since the margin required will be lowered according to the leverage you have chosen. Even though with leverage you can make a bigger profit, there is also a risk of having a bigger loss because the positions you open will be of higher volume (lot size).

Example:
Your trading capital is 10,000EUR
The leverage chosen is 1:100
For a Global trading account this means 100*10,000 = 1,000,000EUR
On EURUSD long position opening at 13,055, position closing at 13,155
The difference is 0.0100 pips thus 1,000,000*0.0100 = 10,000USD this is the profit you made.

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