Now that you have a basic understanding of how to interpret Forex instruments and market pricing, the next key component is the concept of Leverage. Leverage refers to the practice of taking a long or short position in an instrument while only being required to supply a fractional portion of the position’s total order price. The rest of the capital required is supplied by the broker in what is effectively a loan. A leveraged position has the effect of allowing a trader to take larger profits or losses without having to keep the entire position amount on deposit with the broker. This form of Forex trading is also referred to as buying or selling on Margin. Your margin for a given trade is the amount of capital required to be on deposit with a broker throughout the life of the position.