Hi, I just wanted to confirm if for example I opened an account with £1000 to trade for real (not that I’m ready to do so at the moment). If a position went against me and I was using leverage then the max I could potentially lose would be my £1000 as a margin call from broker would stop me out and prevent me from having to pay out more than I actually have??
I guess what I’m trying to ask is, could there be a situation where somebody has to pay out more than they actually held in an account due to a losing position and using leverage?
Leverage refers to the use of borrowed funds to increase the potential return on investment. In trading and investment, leverage allows traders to control larger positions with a smaller amount of capital, magnifying both gains and losses.
Margin, on the other hand, refers to the amount of funds required to be deposited as collateral to secure a leveraged trade. In other words, the margin represents the minimum amount of funds a trader must have in their account to open and maintain a leveraged position.
Fix your leverage and margin level very carefully because your return will come based on them. Your risk management factors also depend on these two factors.
leverage is really a important financial tool that you can consider this as a part of loan from a broker. beginners always try to bring profit by high leverage , its really a wrong decision.