When you trade with leverage, you can take on a large position without having to pay the full cost at the start. Say you wanted to open a position that was the same as buying 100 Netflix shares. With a regular trade, that would mean paying for the 100 shares in full right away. With a contract for difference, you might only have to pay 15% of the cost upfront.

You can spread your capital further by utilising leverage, but it's important to remember that your profit or loss will still be based on the full size of your position. In our example, that would be the difference between the price of 100 Netflix shares from when you opened the trade, to the point when the trade closed. This means that both profits and losses can be much bigger than what you initially put in. Because of this, it's important to keep an eye on the leverage ratio and make sure you're not trading more than you can afford.

When you trade with leverage, you open a position with money you borrowed from the broker. As part of their investment strategy, traders may want to use leverage to get more exposure with less money on hand. Leverage is used in multiples of the trader's capital, such as 2x, 5x, or more. Leverage can be used both to buy (go long) and to sell (go short). It's important to remember that both profits and losses will be multiplied.