Leverage — the most dangerous tool in trading

Leverage lets you control a much bigger trade than your actual account balance. 100:1 leverage means a $10 deposit can control a $1,000 position.

This sounds exciting because it multiplies your profit. It also multiplies your loss, at the exact same rate. A small market move that would barely matter without leverage can wipe out your entire account with it.

Leverage is not free money — it's borrowed exposure. Most account blow-ups in forex trace back to leverage being used carelessly, not to bad chart reading.

Margin and leverage are two sides of the same coin. Margin is the actual amount of your own money the broker sets aside to "hold" a leveraged position open; leverage is the ratio between that margin and the full position size. Run out of usable margin because of a losing position, and you risk a margin call — the broker automatically closing your trades to protect itself, often at the worst possible moment.

Higher leverage isn't automatically reckless on its own — it's reckless when it's paired with position sizes that ignore the risk-per-trade rule entirely. Two traders can use identical 1:500 leverage, and one blows an account in a week while the other trades safely for years, purely because of how much of that available leverage they actually use per trade.