Leverage

Leverage is the ratio of the amount used in a transaction to the required security deposit (margin). It is the ability to control large dollar amounts of a security with a comparatively small amount of capital. Leveraging varies dramatically with different brokers, ranging from 10:1 to 100:1. Leverage is frequently referred to as gearing. The formula for calculating leverage is:

Leverage = 100 / Margin Percent

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Tags: gearing, Leverage, leveraging, margin

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