How do they make money on leverage?
Leverage is the strategy of using borrowed money to increase return on an investment. If the return on the total value invested in the security (your own cash plus borrowed funds) is higher than the interest you pay on the borrowed funds, you can make significant profit.
What does 20x leverage mean?
20x leverage means that a trader borrows an amount that is 20 times more than their own investment. For example, if you open a trade with $100 and 20x leverage, it equals a $2,000 investment. This you can use leverage to open larger positions with a small amount of capital.
Does trading with leverage increase profit?
When you trade with leverage, you gain full exposure to the full trade value with a small initial outlay. Therefore, your profits and your losses are amplified. This means you can lose more than your initial outlay amount and may need to add additional funds to keep your trades open. This is known as a margin call.