Forex leverage is often described as using something small to control something large. In Forex, using leverage gives traders the ability to make large trades with a limited amount of money.

So for example, to trade $100,000 of currency, with a margin of 1%, an investor will only have to deposit $1,000 into his or her margin account. The leverage for Forex provided on a trade like this is 100:1. Forex leverage of this size is significantly larger than the 2:1 leverage commonly provided on equities and the 15:1 leverage provided by the futures market.

Although 100:1 Forex leverage may seem extremely risky, the risk is significantly less when you consider that currency prices usually change by less than 1% during intraday trading. If currencies fluctuated as much as equities, brokers would not be able to provide as much leverage.