Understanding leverage

Leverage magnifies your position, and your risk. Respect it.

Trading 101Lesson 5 of 8

All lessons

By the end of this lesson you'll be able to:

01Define leverage and a leverage ratio
02Explain how leverage magnifies gains and losses
03Size positions with leverage safely

Step 1 · Read the guide

Read the guide first

Everything the quiz asks is covered in the linked guide. Read it, then answer the questions below.

What Is Leverage in Trading? How It Works & Risk Guide

Key terms

Leverage Leverage Ratio Margin Position Sizing

Step 2 · Take the quiz

Quick check

10 questions

Answer all 10, then check. Wrong answers show a hint and a link back to the guide.

Question 01
What does leverage let a trader do?
Question 02
With 10:1 leverage, one dollar of your capital controls how much exposure?
Question 03
You have $1,000 and use 20:1 leverage. What is your maximum position exposure?
Question 04
With 50:1 leverage, how much of your own capital backs a $5,000 position?
Question 05
Leverage magnifies which of these?
Question 06
A 1% market move against a 10:1 position changes your capital by about:
Question 07
A 2% move against a 25:1 leveraged position changes your capital by about:
Question 08
Two traders each have $2,000. One uses 5:1, the other 50:1, on the same trade. The 50:1 trader has:
Question 09
How should higher available leverage be treated?
Question 10
What should decide your position size?

Answered 0 of 10 · pass 70% (7/10) to complete

Trading 1015 of 8

Understanding leverage

Leverage magnifies your position, and your risk. Respect it.

Trading 101Lesson 5 of 8

All lessons

By the end of this lesson you'll be able to:

01Define leverage and a leverage ratio
02Explain how leverage magnifies gains and losses
03Size positions with leverage safely

Step 1 · Read the guide

Read the guide first

Everything the quiz asks is covered in the linked guide. Read it, then answer the questions below.

What Is Leverage in Trading? How It Works & Risk Guide

Key terms

Leverage Leverage Ratio Margin Position Sizing

Step 2 · Take the quiz

Quick check

10 questions

Answer all 10, then check. Wrong answers show a hint and a link back to the guide.

Question 01
What does leverage let a trader do?
Question 02
With 10:1 leverage, one dollar of your capital controls how much exposure?
Question 03
You have $1,000 and use 20:1 leverage. What is your maximum position exposure?
Question 04
With 50:1 leverage, how much of your own capital backs a $5,000 position?
Question 05
Leverage magnifies which of these?
Question 06
A 1% market move against a 10:1 position changes your capital by about:
Question 07
A 2% move against a 25:1 leveraged position changes your capital by about:
Question 08
Two traders each have $2,000. One uses 5:1, the other 50:1, on the same trade. The 50:1 trader has:
Question 09
How should higher available leverage be treated?
Question 10
What should decide your position size?

Answered 0 of 10 · pass 70% (7/10) to complete

Trading 1015 of 8

Understanding leverage

By the end of this lesson you'll be able to:

Read the guide first

Quick check

What does leverage let a trader do?

With 10:1 leverage, one dollar of your capital controls how much exposure?

You have $1,000 and use 20:1 leverage. What is your maximum position exposure?

With 50:1 leverage, how much of your own capital backs a $5,000 position?

Leverage magnifies which of these?

A 1% market move against a 10:1 position changes your capital by about:

A 2% move against a 25:1 leveraged position changes your capital by about:

Two traders each have $2,000. One uses 5:1, the other 50:1, on the same trade. The 50:1 trader has:

How should higher available leverage be treated?

What should decide your position size?

Understanding leverage

By the end of this lesson you'll be able to:

Read the guide first

Quick check

What does leverage let a trader do?

With 10:1 leverage, one dollar of your capital controls how much exposure?

You have $1,000 and use 20:1 leverage. What is your maximum position exposure?

With 50:1 leverage, how much of your own capital backs a $5,000 position?

Leverage magnifies which of these?

A 1% market move against a 10:1 position changes your capital by about:

A 2% move against a 25:1 leveraged position changes your capital by about:

Two traders each have $2,000. One uses 5:1, the other 50:1, on the same trade. The 50:1 trader has:

How should higher available leverage be treated?

What should decide your position size?