Sunday, February 17, 2008

Leveraging Your Position

Leveraging - as the word suggests implies using a lever- a simple device like crow bar where with little effort you can shift a boulder. Leveraging in stock market parlance implies using small amount of money and taking bigger positions ie., several times more and hence the gains when the stock price rises is also several times more than it would have normally been.

the flip side of leveraging, however is that the losses when they happen are also multiplied by the same factor - a fact that is often disregarded despite knowing the risks. It is therefore very important from the investment point of view that you manage your money well. Weigh the pros and cons and trade well.

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