For example, assume you buy or sell a contract worth $100,000 and it moves against you by $2,000. No matter how much money you put up, your dollar loss will always be the same—$2,000—but the percentage loss varies with the amount of leverage. At 100:4 leverage, you will have lost half of your investment. At 100:2 leverage, you will have lost your entire investment. And at 100:1 leverage, you will have lost twice your investment and owe the dealer $1,000.
Notional value = $100,000 Loss = $2,000
Original Investment | Leverage | Remaining Funds | Loss |
$4,000 | 100:4 | $2,000 | 50% |
$2,000 | 100:2 | $0 | 100% |
$1,000 | 100:1 | -$1,000 | 200% |
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