What is Leverage?

Using leverage in the context of the forex market means trading on a margin. It is when traders only put up a percentage of the full amount to start a transaction, allowing them to trade with larger sums of money. A broker quotes a ratio which represents the amount they are prepared to lend a trader, for example; 100:1 is a 1% margin requirement so for every £1 the trader puts up, the broker will lend him £100. See Margin.