What is the difference between margin and leverage?

Read more Margin and leverage are often thought to be the same thing. However, while both can be used to amplify an investor’s buying power when trading stocks, they have some key differences. Margin trading, or “ buying stocks on margin ” refers to the practice of borrowing money from your brokerage and using that to purchase stocks.

What is leverage in investing?

Leverage in investing is called buying on margin, and it’s an investing technique that should be used with caution, particularly for inexperienced investors, due its great potential for losses. Buying on margin is the use of borrowed money to purchase securities.

How much leverage should I use?

With a leverage of 30-1, for every US$1 you have in your account you can place a trade worth up to US$30 and so on Professional traders recommend using 1% to 2% of your funds on any one trade, 5% at most.

Is it safe to trade with leverage?

While trading with leverage can lead to increased profits on successful trades, it also carries the risk of magnified losses. There are, however, risk-management tools at your disposal on eToro to help reduce potential loss.