In the first video of our new series explaining trading terminology, David Jones looks at one of the first things newbies see when they open a real account – leverage.
What is it exactly? How does it work? Is there any way to see it in a real environment? All these questions and more are answered in this video.
Leverage is one of the basic things that one has to understand and keep in mind when trading. Many traders, even experienced ones, miscalculate its impact and reduce their chances of a profit. Knowing what it is will improve your risk-management, reduce stress levels and could lead to better decision-making.
Do you want David to explain other trading terms? Let us know in the comments and we’ll include them in our next videos.
At Trading 212 we provide an execution only service. This video should not be construed as investment advice. Investments can fall and rise. Capital at risk. CFDs are higher risk because of leverage.
Awesome. Keep them coming!
What is the website for the trading you are using? I would really like to use it. Thank you!
Hi Diego, the trading app is Trading 212. You can open a free Practice Account within seconds at http://www.trading212.com/en/Free-FOREX-Practice-Account-GBP.
great video , you guys have the best trading app , please continue providing videos
You explain everything so well, making me more confident and a better trader
Good easy to understand explanation
Thank you for posting these videos ! They are really really helpful.
Great video! I have learned so much from you!
Very helpful, thank you kindly.
How does one leverage on the trading 212 platform?
Hi Leon, the leverage is automatically applied when you trade Forex and CFDs on Trading 212.
Trading 212
So if you have a £100 margin and its leverage is 5:1 (500), do you pay %5 on the £100 or the £500?
Hi, it’s your overall position value, so £500 in your example.
Pls, put the videos in the correct order in the playlist. Thanks for the videos.
Please do
Awesome videos David, quick question what is the whiteboard software you’re using?
Hi, I use a MS Surface Pro PC/tablet thing so is it just the whiteboard included in that, plus the pen.
Yes. So, exactly how do I go about selecting the leverage factor that I wish to use on the 212 website?
It is defined for all Forex and CFDs instruments and available in the “Margin” column at http://www.trading212.com/en/Trading-Instruments. Also included to the “Instrument details” section in the trading app.
So there is no way to lower or higher the leverage to our needs?
Can you show a example on trading 212 using leverage and where to find it on the plat form and how to opt in
Hi Qasim, the leverage is applied automatically when trading CFD instruments on Trading 212. It is listed at http://www.trading212.com/en/Trading-Instruments (columns “Margin – Retail Clients” and “Margin – Professional Clients”).
Could use more!
its also a great show!
Just simply, leverage means getting competent investment profit with small amount of money on assets such as securiteis, funds, etc.
Do I misunderstand or did he basically explain how leverage can actually be used to reduce risk (if used properly) ?
excuse me I have a question, Does using leverage request some costs, fees or interests that I should pay to the broker?
Hello Mouhcine, interest swap is due when trading on margin.
Trading 212 so if you buy SOXL for 2,000$ when I sell the stock do you have to pay interest on it??
Hi, I have been using the demo account for a few weeks and am thinking of opening an account. Is it possible to reduce the leverage to 1:1 to begin with to reduce risk ?
Hi Francis, for the CFD instruments that option is unavailable. We also offer investing in real shares and ETFs without leverage, so you may want to take a look – http://www.trading212.com/en/Free-Stock-Trading.
Great Video David!, do you have to leverage when trading commodities market?
Hi Quinton, the commodities are traded on margin (with leverage) on Trading 212.
What’s the difference between lavage and margin trading
I am an INDIAN …can I trade in foreign stocks …..like Dow and Jones….and in currency exchange…
This why I trade mostly pink sheet . Because I hold so many shares for less . Like 500 I own like 3M shares yes risky but if I’m right .
Hello. Can a trader use leverage to short a stock ?
So basically, leverage is a synonym for a loan with an interest rate?
Thankyou saved me watching the video.
Another great video!
Lmaoo his hand writing
Do you guys have a video about futures market?
To be included in our to-do list. Hit the notification button to make sure you won’t miss it 🔔
Great vid
thanks!
very clear, thank you!
Sorry about the question, but why is the leverage displayed in the app as 1:5 instead of 5:1?
Can you take out leverage on a stocks and shares invest account? or a stocks and shares isa? or is margins only a CFD element?
So if I have 500 account and I want to place a trade with 10,000 units how can I place leverage where it will only be 10 or 100 I place on the trade
Couldn’t we have a more respectable, legible text?
can u really not read that lol
Good video. Proof that simple explanations, not assuming the listener or student has any preconceived ideas, is probably the best approach to these tutorial videos. if only they all took this approach.
Thank you!
Sorry but I still don’t understand.
Wouldn’t everyone just got out and do the biggest leverage (hoping to win)and if they lost just walk away?! Only out of pocket £100 (e.g)
With mortgage or cars they take the car or property from you if you don’t make payments.
Be helpful to understand that pragmatic side of leverage?
Half these comments high key look fake
Leverage is given in ratios, can u please explain it further.
Hey, there! The use of leverage allows you to purchase more units of your desired instrument than your available funds.
For example, if you have deposited 100 USD in your account and you wish to trade with an instrument with a leverage of 1 : 10, you can open a position of up to 100 * 10 = 1000 USD in value.
So a x20 leverage on an exposure of $1,000 means I would only have to invest $50 (but borrow $950). If my hunch about the market is right and the share price sky rockets I can make a big profit for very little investment. But if I’m wrong and either I don’t deposit more to keep the position and the exposure goes to, say, $1000 – (75% of $50) then my position will get liquidated and I will only get around 25% of my initial investment back (at best)? I think I read there are laws which stop the trader from actually owing money – not sure?
Loved this explanation even 5 years later! Thank you so much!
Glad it was helpful!
How can I change the leverage on the app
The leverage can’t be manually adjusted but varies for each instrument we offer. You can find the exact ratio in the “Instrument Details” section.
I have been looking for this video for so long. Thanks so much, you made it quite simple. 🖖
It’s type of loan that gives you more power into buying, but if you lose you will end up being in debt 😅