Investing Dictionary
Risk

What is Leverage?

Using borrowed money or financial instruments to amplify your investment

Full Explanation

Leverage magnifies both gains and losses. 2x leverage means if the market goes up 10%, you gain 20%. But if it drops 10%, you lose 20%. Enough leverage can wipe out your entire account.

Pro Tip

Leverage is a double-edged sword. Professionals use it carefully. Beginners should avoid it.

Related Risk Terms

Margin

Borrowing money from your broker to buy more stocks

Concentration Risk

Too much money in one stock, sector, or asset type

Drawdown

How much your investment dropped from its peak

Counterparty Risk

The risk that the other side of a deal can't hold up their end

View all Risk terms →

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