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What is Leverage & How Does It Work? 💥



Welcome to another instalment of our NexxtGen Markets educational series, designed to help you become a more confident and informed trader. Today we’re unpacking a powerful, sometimes misunderstood concept: leverage. Used wisely, it can amplify your returns. Used carelessly, it can amplify your losses. So let’s break it down.


🔎 What is Leverage?


Leverage in trading allows you to control a larger position in the market with a relatively small amount of capital. Think of it like a loan from your broker, enabling you to open trades that exceed your account balance. For example, if you have £1,000 in your trading account and use 10:1 leverage, you can control a position size of £10,000.


This tool is available across many markets on NexxtGen Markets, including forex, commodities, indices, stocks, ETFs, and crypto.


⚙️ How Does Leverage Work?


Let’s say you're trading gold using 20:1 leverage. With just £500, you can take a position worth £10,000. If the market moves 1% in your favour, you make £100 – a 20% gain on your capital. However, a 1% move against you would mean a £100 loss. That’s why risk management is critical.


Your leverage ratio determines how much market exposure you have relative to your capital. On eToro, different assets come with different leverage caps, aligned with regulatory standards.


📉 Risks of Using Leverage


Leverage can increase both profits and losses. It’s a double-edged sword.


  • Margin Calls: If the market moves against you and your losses exceed your available margin, your position may be closed automatically.

  • Volatility Impact: Highly leveraged trades can be particularly vulnerable during periods of market volatility, when price swings are more extreme.

  • Overexposure: Traders often mistakenly use high leverage on multiple trades, leading to an overall fragile portfolio.


That’s why seasoned traders use leverage conservatively, ensuring it aligns with their risk tolerance and trading strategy.


🔐 Managing Leverage Risk Like a Pro


Here are four essential risk management tips:


  1. Use Stop-Loss Orders: Protect your downside with automated stop-loss levels.

  2. Limit Position Sizes: Don’t risk more than 1-2% of your capital on a single trade.

  3. Stay Informed: Follow market news and economic calendars.

  4. Diversify Your Trades: Spread risk across different asset classes or strategies.


Platforms like NexxtGen Markets provide advanced trading tools and charting features to help manage your exposure wisely.


📊 Where Can You Use Leverage?


Leverage is available on many asset classes via eToro:


  • Forex: Up to 30:1 for major pairs

  • Indices & Commodities: Typically up to 10:1 or 20:1

  • Stocks & ETFs: Generally up to 5:1

  • Cryptoassets: Up to 2:1 due to higher volatility


Always check specific leverage limits based on your region and regulatory status.


🧠 Final Thoughts: Is Leverage Right for You?


Leverage is neither good nor bad—it’s simply a tool. Like all tools, it should be used with skill and care. Start small. Practice with demo accounts if needed. And always trade with a clear plan in mind.


At NexxtGen Markets, we offer access to global markets with flexible leverage options, tight spreads, and cutting-edge tools so you can trade with confidence.


📈 Join Us


If you’re ready to start your trading journey or refine your skills, NexxtGen Markets is here to help. Join Steve and the community to access high-quality insights, proven strategies, and ongoing mentorship that can make a difference in your trading success. https://bit.ly/nexxtgenmarkets


⚠️ Risk Warning


Trading and investing carry risks. You should seek professional advice before engaging in such activities. Leverage can amplify both gains and losses. Past performance is not indicative of future results. Full risk disclosure: http://nexxtgen.pro/risk


🧾 NexxtGen Markets partner with eToro and may receive a small commission for anyone joining eToro via our website or socials.















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