What is leverage in futures trading?
An example of an AI chatbot conversation about understanding leverage in futures trading.
What is leverage in futures trading?
Leverage in futures trading allows traders to control a larger position with a smaller amount of capital. It amplifies both potential gains and losses.
How does leverage affect my risk in trading?
Higher leverage increases your potential risk because even small market movements can lead to significant losses. It's crucial to manage your risk carefully.
What is a common leverage ratio used in futures trading?
Common leverage ratios in futures trading can range from 10:1 to 50:1, depending on the asset and the broker's policies.
Can you give an example of how leverage works in a trade?
Sure! If you have $1,000 and use 10:1 leverage, you can control a position worth $10,000. If the market moves in your favor by 1%, you gain $100, but if it moves against you, you could lose your entire investment.
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