Leverage is a double-edged sword that can magnify both gains and losses. While it can increase potential profits, it can also lead to significant losses if not used carefully. This is why proper margin management is crucial when using leverage. Forex traders need to be aware of their exposure to risk and make sure they have sufficient margin to cover any potential losses.
Proper margin management includes setting stop-loss orders, monitoring open positions, and adjusting the size of trades to ensure that the risk is managed effectively. This lesson describes the margin and leverage values based on different account types.