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Leverage

Leverage is a certain type of loan offered by a broker or exchange in a margin trading to increase the profitability of the trader. Leverage can also be termed as the debt borrowed to fund assets by the firm.

Leverage is often used by investors to drastically increase their purchasing power in the market. For example, if someone buys $100 worth of token, and increases their position with leverage by 10x, their investment is now $1000. The leverage is commonly expressed in the form of a ratio of 1:10.

The amount a trader initially had is known as a margin. It is often used as collateral during any mis-happenings. Altogether margin trading is extremely risky. While it can amplify the profits too many folds, it is also subjected to huge losses.


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