Leverage is a powerful tool in forex trading that allows traders to control a large position with a relatively small amount of capital. It is expressed as a ratio, such as 50:1 or 100:1, meaning that for every dollar in the trader’s account, they can trade 50 or 100 dollars in the market. While leverage can amplify potential profits, it also increases the risk of significant losses. For instance, with a leverage of 100:1, a 1% market movement can result in a 100% change in the trader's account value, either positive or negative. This makes leverage a double-edged sword, requiring careful risk management strategies, such as setting stop-loss orders and not overextending positions. Understanding and using leverage wisely is essential for successful forex trading, as it can significantly impact a trader’s performance and account stability.