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Glossary

Leverage

Part of the theme Leverage, margin and liquidation.

Definition

Leverage is controlling a position larger than your cash by borrowing the difference, which multiplies both gains and losses relative to your capital.

It does not change the asset's own percentage move, only how large that move is relative to your money. A 5 percent move in the asset becomes a 50 percent move in your equity at 10x leverage.

Formula / example: Leverage = notional / margin. $1,000 controlling $10,000 is 10x

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