Leverage

Leverage means borrowing money to invest, so you can control a larger position than you could afford outright. You encounter it with options, futures, and margin accounts—tools that let you amplify your gains (or losses). It matters because leverage can turn small price moves into outsized returns, but it cuts both ways: you can lose more than you invested. For example, if you use leverage to control $10,000 worth of stock with only $2,000 of your own money, a 10% price drop wipes out your entire stake. Leverage is powerful but risky—most beginners should avoid it until they understand the downside.