This kind of loan that the broker gives a trader to make a deal with much more volume than the funds in their account allows. Credit is "issued" at the opening of the transaction, and is finalised at the close of a position. Leverage come in different sizes: 1:20, 1:50, 1:100, 1:500 and 1:1000. It is necessary to almost every trader because the minimum size of a transaction on the Forex market (see) is 1 lot (see), which is equal to 100 thousand currency units - such as dollars. Agree, that this is a quite tangible amount. Therefore, for a period of one transaction broker gives a loan of the amount. For example, you decide to open a transaction with the volume of 1 lot. If you have chosen Leverage 1:20, the actual amount from your account that will be used in the transaction is one-twentieth part of the 100,000 - ie 5000. The remaining amount you give the broker. Accordingly, if the leverage is 1:50, then 2000 dollars from your account will be used in the transaction, 1:100 then one thousand, 1:500 allows you to trade a whole lot with only 200 dollars, and the leverage 1:1000 allows you to trade on the marker with only 100 dollars.

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    Citadel of Trading