On the other hand, if you had a broker that was offering leverage, the situation would look quite different. If the broker required a 10% margin, you would need to only deposit $1,000 to control 100 shares of the company’s shares in the market. Then, if the market moves up to a price of $120 per share, you would have gained the same $2,000 on the trade. However, the difference is that you would have had to invest a much smaller amount of capital for a gain of 200%. Now, if the market had moved downwards to $80 per share, you would have lost $2,000 which is twice the amount of your initial capital investment.
As you can see from these examples, trading with leverage does provide you with increased potential for larger profits. However, it does come with more risk of large losses which you should always be aware of.