The Relationship Between Margin and Leverage - Deepstash

The Relationship Between Margin and Leverage

You use margin to create leverage.

Leverage allows you to trade positions LARGER than the amount of money in your trading account.

Leverage is the ratio between the amount of money you really have and the amount of money you can trade.

When a trader opens a position, they are required to put up a fraction of that position’s value “in good faith”. In this case, the trader is said to be “leveraged”.

The “fraction” part which is expressed in percentage terms is known as the “Margin Requirement”.

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