Leverage is the ability to control a much larger investment with a relatively small initial investment.  Basically, with a little cash you can control something that has a value up to 200% more — depends on the broker.  Generally leverage is recorded in ratio.  Forex brokers offer leverage from 10:1 up to 400:1. 

Please be careful and don’t use high leverage ratio 50:1 - good enoughyou.  And if you decide to go higher, please don’t go over 100:1. 

Now let’s see what leverage allows you to do:

Example:
For our example let’s use a 100:1 leverage.  Also, let’s say that you have a mini account with $1,000.

One mini lot will cost you $100, and with that you’ll be able to control $10,000 (value of 1 mini lot).  So, with $1,000 in your account theoretically you could open 10 positions with one lot each which would put you in control of $100,000.

But as I said this is theoreticall only because in practice you can’t do that and you shouldn’t do that even if you could… you should manage your money differently .  The reasons why it’s only theoretical is– because of the spreads you’d have less than $100 available after you opened 9 positions, therefore you wouldn’t have enough to buy one more lot/open one more position.

As you can se we have only $73 left and since one lot costs us $100 we can’t buy one more. See margin and margin call to learn more.