Leverage in futures is a tool that allows a trader to control a position larger than his or her available capital. Simply put, leverage means using borrowed money to enhance the potential return from an investment or trade. Here's a more detailed explanation:
1. The concept of financial leverage:
- Financial leverage enables the trader to control a larger size of the financial asset compared to what he actually owns. For example, if you have $1,000 and use 10:1 leverage, you can control a position worth $10,000.