Leverage

Leverage creates market exposure larger than the capital committed by using borrowed funds, derivatives, or margin-based product structures within an account.

A leverage ratio describes the relationship between exposure and supporting capital, so a small price move can become a much larger percentage change in account equity. Losses can consume available margin, trigger restrictions, and force liquidation before the market recovers. Financing charges, gaps, slippage, and changing margin requirements can worsen the outcome beyond a simple price-times-ratio illustration during volatile trading.

Leverage accelerates losses as well as gains and can cause forced closure at an unfavorable price.