Leverage is a financial tool that allows an individual to increase their market exposure to a point that exceeds their actual investment. For example, a trader goes long 10000 units of the USD/JPY, with $1,000 dollars of equity in their account.The USD/JPY trade is equivalent to controlling $10,000. Because the trade is 10 times larger than the equity in the traderâ€™s account, the account is said to be leveraged 10 times or 10:1. If the trader bought 20,000 units of the USD/JPY, which is equivalent to $20,000, their account would have been leveraged 20:1. Leverage allows an individual to control larger trade sizes. Traders will use this tool as a way to magnify their returns. Itâ€™s imperative to stress, that losses are also magnified when leverage is used. Therefore, it is important to understand that leverage needs to be controlled.