HOW DOES LEVERAGE WORK IN TRADING?
Leverage in trading allows you to control a larger position with a smaller amount of capital. A leverage of 2:1 means that for every $1 you have, you can control $2 of a trading position. Similarly, a leverage of 10:1 means you can control $10 for every $1 you have.
The money doesn't actually come from the exchange , but rather it's borrowed from the exchange to open larger positions. The exchange provides the leverage as a service, allowing traders to amplify their potential profits or losses. It's important to note that while leverage can increase potential gains, it also magnifies potential losses, so it should be used with caution and proper risk management.
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