Leverage is a word that has many different meanings in finance. For example, traders often use leverage to trade CFDs, which are derivatives that allow traders to speculate on the movement of an underlying asset without actually owning it.
Leverage can also refer to borrowing money from an institution at a specific interest rate with the agreement that you will pay back more than what you borrowed in order for them to make profits. We’ll discuss how both these definitions apply in this blog post!
leverage meaning for finance traders is the usage of borrowed funds for purchasing securities to increase potential returns. CFDs are leveraged products, meaning traders can take advantage of both rising and falling markets by leveraging their trades with margin trading or leverage up to 500x that may help you trade more profitably.
Leverage meaning in finance defines the ratio between actual investment size and available capital, e.g., if using a 50:50 mix when investing $500, then your total exposure will be $1000 ($500 invested + $500 loaned).
The Bottom Line
Now, this could either go well or not so well depending on how much risk you’re prepared to stomach – there’s no hard-and-fast rule here, but it’s worth noting that the bigger your exposure, the bigger your potential returns (or losses). Leverage up to 500x which means you can trade more profitably.