The use of borrowed capital (margin) to increase the potential return of an investment. In forex trading, leverage is often very high (e.g. 50:1 or 100:1), meaning a small amount of capital controls a much larger position. In backtesting, leverage does not change win/loss percentages, but it scales the size of gains and losses. High leverage can dramatically amplify profits and losses, so a backtest must consider realistic leverage to assess risk of margin calls or outsized drawdowns. (E.g., a strategy might be profitable at 1:1 leverage, but at 50:1 the same strategy could blow up due to a string of losses.)

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