What is Leverage?
Quick answer
Leverage is using borrowed money or an instrument’s built-in gearing to control a larger position than your cash alone would allow. It magnifies both gains and losses. In copy trading, any leverage comes from your own account and the instruments involved (options carry leverage-like exposure), so it calls for conservative sizing and firm risk limits.
Leverage is what lets a trader control a position larger than their cash. It can amplify returns, but it amplifies losses just as much, which is why it is one of the most important risk concepts to understand.
How leverage works
Leverage can come from borrowing money from your broker (margin) or from instruments that have gearing built in, like options, where a small premium controls exposure to a larger amount of stock. Either way, a given price move produces a larger percentage change in your account than it would with cash alone. That cuts both ways: the same leverage that magnifies a gain magnifies a loss, and heavy leverage can wipe out a position on a modest move against you.
Why it matters in copy trading
In copy trading, any leverage comes from your own account settings and the instruments you copy, not from the platform. If you copy options strategies, you are taking on their leverage-like exposure, and if your account uses margin, copied trades can too. That is why conservative sizing, a maximum per trade, and firm loss limits matter so much: they keep leverage from turning a bad run into an outsized loss.
Frequently asked questions
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