Leverage

Leverage means borrowing to enlarge a position. The word means lever, and the image fits: a small force moving something much larger. Add 10,000 of borrowed money to 10,000 of your own and you are running two-times leverage.

Gains and losses both double. In that example a 10% rise earns 2,000 — a 20% return on your own money — while a 10% fall costs the same 20%. A 50% fall wipes out your capital entirely.

Interest also keeps accruing. Even with the price flat, losses build as time passes, so leverage demands that you be right about timing as well as direction. Holding longer generally works against you.

Leveraged ETFs deserve extra caution. They reset to two or three times the daily move, so in a choppy market your holding shrinks even when the underlying index returns to where it started. That is why they are not long-term instruments. In short, leverage does not improve skill; it amplifies outcomes. It rewards those who already know what they are doing and simply raises the cost of mistakes for everyone else.