Leverage in forex trading enables traders to control larger positions with a smaller amount of capital, expressed as a ratio (e.g., 100:1). Key points include: 1. **Amplified Returns**: Leverage can significantly increase potential profits by allowing traders to trade larger amounts. 2. **Increased Risk**: It also magnifies losses, making small adverse movements potentially lead to substantial losses. 3. **Margin Requirement**: Traders must maintain a margin as collateral, and failing to do so can result in a margin call. 4. **Choosing Leverage**: Traders should select leverage levels based on their risk tolerance and trading strategy. 5. **Regulatory Limits**: Different regions impose regulations on leverage to protect traders from excessive risk. Using leverage wisely is crucial for maximizing profits while effectively managing risk in forex trading.