Leverage—also known as gearing—refers to the ability in trading to control a larger market position with a relatively small amount of capital.
For example, a leverage of 1:100 means that with €1,000, a position worth €100,000 can be controlled. The difference is provided by the broker as margin.
Leverage increases both potential profits and potential losses proportionally to the level of leverage used. In forex trading, leverage levels between 1:30 and 1:500 are common, although regulations in the EU limit maximum leverage for retail clients to 1:30. Higher limits may apply to professional traders.
Responsible use of leverage requires disciplined risk management, clearly defined position sizing, and consistent stop-loss protection to avoid uncontrolled losses.
