◈ GLOSSARY · TRADING & MARKETS
Leverage.
A definition, in plain English — with the books that teach it.
ClearValue Books · reviewed against sources ·
◈ DEFINITION
What it means
Definition
Using borrowed money or derivatives to control a larger position than your cash alone would allow. Leverage amplifies gains and losses by the same multiple — a 3x leveraged position turns a 10% move into a 30% swing in either direction. Most retail blowups don't come from being wrong; they come from being right but over-leveraged through a normal pullback.
◈ IN PRACTICE
Example
With $10,000 of cash, a 2x leveraged ETF gives you $20,000 of effective exposure. A 5% rise in the underlying index produces roughly a 10% gain — $1,000. A 5% drop produces roughly a $1,000 loss. Over long holding periods, the daily-rebalancing math also drags returns even in sideways markets.
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