InsiderFlow › Glossary › What is leverage?

What is leverage?

Leverage amplifies gains and losses by investing borrowed money: at 5x leverage, +2% becomes +10% — and -2% becomes -10%.

Trading "on leverage" means controlling a position bigger than your capital: with $1,000 at 10x leverage you move $10,000. The broker lends the difference and requires a margin deposit.

The danger is the "margin call": if losses erode your margin, the broker force-closes your positions, locking in the loss. At 10x leverage, a mere -10% wipes out your capital. Leverage is why most retail CFD traders lose money.

Concrete example

With $1,000 at 20x leverage on a stock that drops 5% in an hour, your capital is gone: the move was ordinary, the leverage made it lethal.

How you see it in InsiderFlow

On InsiderFlow these concepts come alive on real data: what big funds and insiders are buying, explained every day.

Frequently asked questions

Should leverage always be avoided?

For beginners, yes. Used judiciously (mortgages, companies, hedge funds) it's a tool; used to speculate it's often a shortcut to zero.

What do 2x, 5x, 20x mean?

The exposure multiplier: at 5x you control $5 for every $1 of capital.