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Leverage

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Filter:Leverage

Category – Leverage

Leverage is the use of borrowed funds to increase the potential return on investment. In trading, leverage allows traders to control larger positions with a smaller initial capital outlay, amplifying both profits and losses. Leverage is commonly used in forex, stock, and futures trading. While it can enhance returns, it also increases risk, as market fluctuations can result in significant losses. Traders must carefully manage leverage to avoid margin calls and ensure that risk is within their tolerance levels.

HEDGING

Hedging is an investment to reduce the risk of adverse price movements in an asset.

DEBT INSTRUMENT

Debt instrument is a paper or electronic obligation that enables the issuing party to raise funds by promising to repay a lender.

ASSET ALLOCATION

Asset allocation is the process of dividing investments among different kinds of assets to optimize risk and reward.

MARGIN CALL

Margin call is a demand by a broker that an investor deposit further cash or securities to cover potential losses.

GROSS MARGIN

Gross margin is the difference between revenue and cost of goods sold (COGS) divided by revenue, expressed as a percentage.

DEBT-TO-EQUITY RATIO

Debt-to-equity ratio is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.

HEDGE FUND

Hedge fund is an investment fund that engages in a wide range of activities to produce high returns for its investors.

LEVERAGED BUYOUT (LBO)

Leveraged buyout (LBO) is the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition.

CASH VS MARGIN TRADING PERFORMANCE

Cash vs. Margin Trading Performance compares the profitability and risk of trades executed with available cash versus those made using borrowed funds (margin). It helps assess the impact of leverage on trading results.

TRADING STRATEGY

A Trading Strategy is a systematic plan used by traders to execute trades, aiming for profitability. It involves rules and techniques based on technical or fundamental analysis, risk management, and market conditions.