What is the leverage limit in trading?

Leverage limit refers to the maximum amount of leverage that a broker allows a trader to use when executing trades. This limit is typically expressed as a ratio, such as 50:1 or 100:1, indicating the proportion of borrowed funds to the trader's own capital. In many markets, leverage is used to amplify potential returns, but it also increases the risk of loss. Regulatory bodies in various jurisdictions often impose leverage limits to protect traders, particularly retail investors, from excessive risk. Understanding the leverage limit is crucial, as it affects margin requirements and the overall risk profile of a trading strategy.