Leverage is a concept that enables you to multiply your exposure to a financial instrument, without committing the whole capital necessary to own the physical instrument.
When trading using Leverage you only need a fraction of the total value of your position, the rest is effectively lent to you. Profits and losses are based on the total size of the position, so the end result of a trade can be much larger than the initial outlay, in terms of profits or losses.
CFDs are a form of leverage trading. The amount needed to open and maintain a leveraged trade is called “the margin”. Trading using leverage is sometimes called “margin trading”. In general, the term leverage is used when a small change in the price of the CFD is amplified into a bigger change so that the CFD offers an “accelerated” return/loss.
Leverage of “50%” (or 1:50) means that if the price of the underlying asset changes by 5%, it is as if the price of the CFD changed by 50%.
For example, a $100 balance leveraged by 1:50 increases to $5000. This allows you to buy up to $5000 worth of instruments.
Royal Broker Offering different leverage on each trading account type.