O'Reilly logo

Trend Trading For Dummies by Barry Burns

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Chapter 16

Understanding Leverage

In This Chapter

arrow Leveraging your way to wealth

arrow Trading options, futures, and money

Trading isn’t a get-rich-quick business; however, by trading, you can make money faster than normal. One of the techniques people use to get wealthier faster is leverage. And you can use leverage (which I define in this chapter) not only in the financial markets but also in many areas of business.

In this chapter, you find out what leverage is and how to use it in trading to make money faster than usual. You also discover the perils to beware of when using leverage.

Using Leverage for Financial Gain

In mechanical terms, a lever is a bar that rests over a fulcrum, used to move an object at one end by applying force at the other end. It can provide a mechanical advantage by allowing you to move a heavy object with relatively less force than would be required without the lever.

In financial terms, leverage refers to the ability to control a financial asset with a smaller amount of money than the asset is worth. In the following sections, I explore leverage as it relates to using it to make money with a small account and also the risks that accompany it.

Controlling a lot of money with a little money

The use of leverage is paramount to accelerate success in all types ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required