# (3) Select the leverage you would like to trade with
### FAQs:
* [**What is leverage?**](#what-is-leverage-leverage-refers-to-the-ability-to-control-a-larger-position-size-than-the-amount-of)
* [Key Concepts of Leverage](#key-concepts-of-leverage)
* [**What is the importance of leverage in trading?**](#importance-of-leverage-in-trading)
* [**How much leverage should I start with if it's my first time trading?**](#how-much-leverage-should-i-start-with-if-its-my-first-time-trading)
***
## Step Three: Select the leverage you would like to trade with
#### What is leverage? Leverage refers to the ability to control a larger position size than the amount of capital you have available in your trading account. It allows traders to amplify their potential profits (and losses) by using borrowed funds.
#### **Key Concepts of Leverage**
1. **Amplification of Exposure:**\
Example: If you have $1,000 and use 10x leverage, you can control a position worth $10,000. This means you’re able to trade with 10 times your actual capital.
2. **Margin Requirement:** The margin is the amount of your own capital required to open a leveraged position. For 10x leverage, your margin would be 10% of the total position size.\
\&#xNAN;*In the example above, to open a $10,000 position, you would need to set aside $1,000 as margin.*
3. **Potential for Higher Returns:** If the market moves in your favour, leverage can significantly amplify your profits. For instance, a 10% increase in the asset price could yield a 100% return on your initial investment if using 10x leverage.
4. **Increased Risk:** While leverage can enhance profits, it also increases risk. A small adverse price movement can lead to significant losses. If the market moves against your position, you may face liquidation, where your position is automatically closed to prevent further losses. More about this in the “liquidation” section.
5. **Liquidation:** If your losses reach a certain point, the platform may automatically close your position to recover the borrowed funds. This occurs when the equity in your account falls below the required margin.
***
#### **Importance of Leverage in Trading**
* **Trading Strategies:** Leverage allows traders to employ various strategies, including speculation on price movements and hedging against potential losses in other positions.
* **Market Sentiment:** High leverage levels in the market can indicate trader confidence, while low levels may suggest caution.
***
#### **How much leverage should I start with if it's my first time trading?**
If it’s your first time trading, we recommend starting with lower leverages below 25x to minimise risk.
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