what is leverage in Forex Trading?


what is leverage in Forex Trading?
Leverage is the strategy of investing using borrowed money. its results from borrowing capital as a funding source when investing the firm asset base generate returns on risk capital.it is especially uses of various financial instruments capital to increase the high volume of returns over investment.leverage also refer to amount of debts a firm uses to finance assets. when one refers to company or investment highly leverage it means that item has more debt than equity.

How does Leverage works?
Leverages use of borrowed capital in order to undertake investments the results are multiplied the potential results on investment.there is a chance to leverage will also multiply the potential downside risk in case the investment does not pan out.
the concepts of leverage are used by both investor and companies
Leverage significantly increase high return can be provided on investments. this investment is various types of instructions that include options futures and margin accounts. Investors who are not comfortable using leverage directly have a variety of ways to access leverage indirectly.
Key Takeaways
Leverage refers to the use of debt (borrowed funds) to amplify returns from an investment or project.
Investors use leverage to multiply their buying power in the market.
Companies use leverage to finance their assets: instead of issuing stock to raise capital, companies can use debt to invest in business operations in an attempt to increase shareholder value.
Example of Leverage
A company formed with an investment of $5 million from investors, the equity in the company is $5 million; this is the money the company can use to operate. If the company uses debt financing by borrowing $20 million, it now has $25 million to invest in business operations and more opportunity to increase value for shareholders. An automaker, for example, could borrow money to build a new factory. The new factory would enable the automaker to increase the number of cars it produces and increase profits.

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