Leverage

Leverage - The use of borrowed funds to control a larger trading position. In forex, brokers offer leverage (e.g. 50:1, 100:1) so a trader can open positions much larger than the account balance. For example, with 100:1 leverage, a $1,000 account can control $100,000 of currency. Leverage amplifies both gains and losses. As BabyPips notes, leverage allows traders to control larger positions than their equity alone. It’s crucial to manage risk when using leverage.