What is Leverage ? How Does Leverage Works?

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Basically to take any positon or trade in market(Any segment) you need to have the 100% cash, Leverage is a feature/funding given by the broker to take position in any stock or F&O etc. As there is risk involed in trading markets, funding & in case of loss broker may not recover the loss incured on that trade. So the positions taken using this feature brokers will srquare off the positions @ the time decided by the RMS team.

For buying some 100 shares at 800 rupees, you will need all the 80000 rupees.

But if you commit that you will sell back those 100 shares before evening close of trading day, then probably you will sell at say 790 rupees per share and get back the 79000 rupees. You will have 1000 rupees loss.

If you sell at 815 rupees, you will get 1500 rupees profit.

So in any case, your profit or loss is not more than 10% for example, so either you will loose around 10% or you will gain around 10%.

If you gain there is no issue with the broker, they feel good and happy.

But if you loose, the broker cannot take up the loss, the loss has to be taken from you only.

That is why the broker will only block around 10% of your money as margin (in case you end up with loss ) and allow you trade shares on intraday. Intraday mean you will sell of the shares before evening and get the sale proceedings money to your account.

This is called leverage.

9x leverage means if you have 100 rs, you can buy shares worth of 900 rs. 100 rs only will be blocked from your account.

21.7x leaverage means if you have 100 rs, you can buy shares worth 2100 rs.

34x leverage means you can buy futures worth 3400 with just 100 rs blocked from your account.