Leverage can significantly increase both profits and losses in trading. It allows traders to control larger positions with a smaller amount of capital, magnifying the effects of market movements. However, leverage also increases risk, as losses can exceed the initial investment. Traders must manage their leverage carefully and use appropriate risk management techniques, such as stop-loss orders, to limit potential losses. High leverage is not suitable for all traders and can be especially risky for inexperienced traders or those with a limited trading account. Understanding the relationship between leverage and risk is crucial for successful trading and can help traders make informed decisions about their trading strategies.
