Any candidate for the status of an avid trader, besides the desire to tie their fate to trading, must undoubtedly delve into its aspects: strategies, market news. But before all, a true expert needs to understand the terminology and decode key formulations.

'Credit leverage' is one of such expressions.

The concept and theses of credit leverage

Credit leverage is the funds borrowed from a broker to conduct operations in the market and increase income. Otherwise, it is an automatic loan taken for purchase.

• Credit leverage in the stock market is the ratio of the trading range to the trader's total capital.

• In more detail, this is the position of the planned trade relative to the trader's actual financial reserves.

• It follows that the maximum leverage is the highest possible ratio.

In broad terminology, several synonyms occur - financial leverage or leverage, credit leverage.

What is margin

In trading, margin is the difference between the selling price and the buying price.
Margin in conjunction with leverage serves as the collateral part in the trader's account, which is reserved when opening a position.
Brokers determine the degree of minimum margin - the reserved part of the account's funds in a situation of unprofitable trades. It is like insurance for everyone against excessive losses.
The higher the credit leverage, the lower the collateral that is frozen.
As long as the trader has free margin available, they trade relying on credit leverage.

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