Leverage is like borrowing money to make investments, using other people’s funds to amplify the size of your trades. Leverage not only allows you to make larger profits, but it also magnifies your losses. Therefore, understanding how leverage works and how to use it properly is a skill that every forex trader must master. In the forex market, many platforms offer very low margin rates, with some as low as 2%. This means you only need to invest 2% of your capital to control a position 50 times larger than your investment. This makes forex trading very attractive for traders who enjoy using leverage. For example, if you use 50:1 leverage, a 1% market fluctuation could result in a 50% return on your initial investment. This means even small market movements can bring substantial returns. However, the same principle applies in reverse—if the market moves against you, your losses can be magnified as well. So, leverage is like a double-edged sword: it can help you earn more, but it can also cause you to lose more.