Leverage

Leverage lets a trader control a large position with a relatively small amount of capital, expressed as a ratio such as 30:1 or 1:500. With 100:1 leverage, for instance, $1,000 of margin can control a $100,000 position. Leverage amplifies both potential profits and potential losses in equal measure, which is why regulators like the FCA and ESMA cap retail leverage — often at 30:1 for major currency pairs — to limit trader risk.