A stock market is a place where, if one is rightly equipped with the proper knowledge and experience, one can make a lot of money. You can do this even without investing big if the trader is ready to risk high. But the high risk does not mean to hit blind with zero ideas of the probabilities. Leverage is one such instrument that can be devised to accelerate the gain.
What is the leverage?
For a basic understanding of leverage meaning, one can think of it as a lever that can be used to lift the profit rate. When a trader borrows money to invest in a presently active stock to raise the outcome value, it is called leverage.
Significant key points
- It is also understood as the use of debt, which is the borrowed fund, to increase the investment return.
- This increases the buying power of a trader.
- Individuals or companies utilize it to finance their assets.
Benefits of Leverage
Leverage is a useful tool for traders who have been working on the stock market. It contributes to the increasing return of the trade and even allows a trader to trade with higher stakes. This is more than that of the originally invested amount.