What is the Leveraged Instrument?

In the money management calculator, there is an option to choose a financial instrument: Shares or Leveraged.

Leverage on its own is a general financial term meaning a technique to multiply gains and losses. Common methods in which investors and traders use leverage to trade the markets are by margin loan, by borrowing money to buy shares, or through more sophisticated methods via derivatives such as CFD's, Options or Warrants.

Another term for leverage is gearing which also means borrowing funds through some financial methodology to increase your profits (or magnify losses). There are gearing ratios available which identify your equity in your portfolio of investments.

In the screenshot above, you can see that Leverage is represented by a percentage as investors typically put down a small percentage of capital to gain exposure to the full value of the stock. Typical percentages used in CFD trading range from 5% for the top 20 stocks and range all the way up.