What is the relationship between leverage and margin?
Margin and leverage work together to provide the financial framework for futures trading. Leverage is the ability to control a larger position with less capital and a key differentiator of trading futures versus other asset classes.
While margin is the required amount of money needed in your account to open and maintain a position, the associated leverage available provides much greater buying power allowing you to put on more positions and trade larger numbers of contracts than otherwise possible.
Although increased leverage allows for potentially greater profits, it also comes with increased risk and the potential for greater losses. Defining a risk management strategy is a beneficial step to help traders protect their account.
