Leverage
Trading does not have to be limited to the trader’s equity. There are instruments that can be used to trade bigger lot sizes. One such strategy or instrument is leverage.
Leverage allows traders to trade with borrowed money from the broker.
Any loss or profit made on the leveraged amount is taken from or added to the trader’s account.
Leverage is used to maximize profits. However, it also maximizes risks.
Brokers offer different amounts of leverage. If the leverage offered is 1:50, it means that for every unit of currency the trader invests from their own account, they can borrow 50 from the broker.
With the help of leverage traders can trade big lot sizes that they might not have been able to afford otherwise. Leverage allows traders with small accounts to trade bigger positions.