Leverage
Also called: gearing, margin trading
Using borrowed money, or products such as futures and options, to take a bigger position than your own money allows, magnifying gains and losses.
Leverage multiplies the effect of every price move on your own money. If half your position is borrowed, a 10% fall in price is a 20% loss of your own money, before interest. Losses can exceed what you put in, and you still owe the loan.
Lenders and brokers can demand more money or sell your positions when prices fall, often at the worst moment.
Example
You invest ₹50,000 of your own and ₹50,000 borrowed. The shares fall 20% to ₹80,000. After repaying the ₹50,000 loan, you have ₹30,000 left, a 40% loss of your own money.
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