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Is leverage risky?

Leverage, which is the use of borrowed capital to increase the potential return on an investment, can be a powerful tool for traders, but it also carries additional risk. Leverage allows traders to gain exposure to a larger position with a smaller amount of capital, which can magnify both gains and losses. This means that while leverage can increase potential profits, it can also lead to larger losses if the trade goes against the trader. Therefore, it is important for traders to carefully manage their leverage and only use it in moderation. Over-leveraging can lead to excessive risk and potentially result in significant losses.

“When you really believe that trading is simply a probability game, concepts like right or wrong or win or lose no longer have the same significance.” – Mark Douglas

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