Leverage is the ability to control a larger trade using a smaller amount of your own money. It allows a trader to take positions that would otherwise be too big to afford. For example, with leverage of 1:100, a trader can open a position worth $10,000 by using only $100. The remaining value is simply part of the trade size, not something paid upfront.

This means that even small price movements can lead to noticeable gains because the position size is large. At the same time, losses also increase in the same way. So leverage works both ways. It can help grow returns faster, but it can also reduce the account quickly if the market moves against the trade.