In simple terms, leverage is the ability to be in control of a huge sum of money without spending too much money yourself and borrowing the rest instead. So, I figured some traders would love to know how to how to do a simple leverage calculation so that they can use it wisely. For instance, a leverage ratio of 100:1 means that you, as a trader can trade up to $10,000 worth of currency by making a deposit of $100. This is on a higher side but you get the point, right? Most brokers allow only up to a 50:1 ratio to limit risk. For example, Forexchief broker and they allow up to 1:400 even on stocks. That does not mean you should use 1:400. The higher the leverage, the more volume you can buy. When you increase your trade volume your pip value is high, you profit more and you lose more. The risk is automatically increased when you use higher leverage and lot size. This concept is huge in the forex market and is utilized by both companies and investors. Investors use leverage to increase their returns on investment by making profits on fluctuations in exchange rates of two different currencies. Likewise, companies use it to finance their assets so that instead of utilizing stock to get capital, they maximize on debt financing in order to increase the value of their shares.