Leverage is the use of various financial instruments or borrowed funds, such as margin, to increase the potential return of an investment. Leverage is a double edge sword and can be considered dangerous weapon because traders add bigger position sizes without actually owning the funds to cover potential losses. But it also can be a very powerful tool if it has been utilized to increase the investments power as long as traders have efficient money and risk management plans associated with it.

For Example: in order to trade 100,000 units of EUR/USD. Traditionally, traders need to have 100,000 US dollars physical owned money or we say 1:1 leverage. But with 100:1 leverage, traders are only required to deposit 1/100 of the nodded amount which is equivalent to 1,000 US dollars.

If you are a kind of trader considering and seeking to have relatively high leverage, you should be familiar with the following:

1. The rules and boundaries of this kind of trading activities and how you will handle it.
2. Fully understand all what is leverage (in) Forex and how it works, both for you and for counter parties.

The use of Leverage can be highly profitable but it can be your worst nightmare and enemy if it has not been utilized in an efficient way. Let us go through a practical example in order to illustrate how leverage can work for and against traders.

Having a 200-1 leverage account means that every $1000 you are willing to invest can control a $200,000 position. Standard lot actual value in the market equals $100,000, so by investing $2000 in the market with your broker you are getting 2 standard lots. let us say that you will have 500:1 leverage, this will mean that you will have more investments power and this will be great for you if the market went in your direction and your plans has been fulfilled but       it also means that even a small move against your opened order can leave you without any funds and clear all your investments.

So to conclude this matter; the high degree of leverage that is often obtainable in trading activities can work against traders as well as their favors. The use of leverage can lead to large losses as well as gains.

Let us consider a real live example to feel the effect of using both high and low leverages.

First let us consider some facts about forex trading activities:

To buy or sell a standard lot directly in the market without depending on any leverage you will need $100,000 owned funds.
Mini lots are offered by some brokers and it worth $10,000.
Average pip value for major pairs in standard accounts is around $10.
Average pip value for major pairs in mini accounts is around $1.    
Let us now assume that you will open a trading account and you are planning to invest $5000 in it, now you are not sure which leverage to consider and use in this account. What we are going to do now is to give you some hints about potential scenarios you will most probably face by having different leverages and after going through it you can decide which leverage best suit your need.

By having 100:1 leverage in a standard account; to open a standard lot you will physically need $100,000, but the majority of traders do not intend to invest such amount even if they have it, so by using 100:1 leverage they will physically need 100,000/100= $1000 to open one standard lot, so $5000 balance will enable you to open up to 5 standard lots at the same time.
By having 200:1 leverage in a mini account; to open a mini lot you will physically need $10,000, by using 200:1 leverage you will physically need 10,000/200= $50 to open one mini lot, so $5000 balance will enable you to open up to 100 mini lots at the same time.

By having 300:1 leverage in a mini account; to open a mini lot you will physically need $10,000, by using 300:1 leverage you will physically need 10,000/300= $33.33 to open one mini lot, so $5000 balance will enable you to open up to 150 mini lots at the same time.
By having 400:1 leverage in a mini account; to open a mini lot you will physically need $10,000, by using 400:1 leverage you will physically need 10,000/400= $25 to open one mini lot, so $5000 balance will enable you to open up to 200 mini lots at the same time.
By having 500:1 leverage in a mini account; to open a mini lot you will physically need $10,000, by using 500:1 leverage you will physically need 10,000/500= $20 to open one mini lot, so $5000 balance will enable you to open up to 250 mini lots at the same time.

Now by illustrating the outlines of required margin for each lot in different accounts, we will assume you are a kind of trader that will use the full deposited amount in your trading account for trading activities (this is for illustration purpose only to show the difference between different leverages).
Let us assume that you will trade in (EUR/USD) symbol and you will open buy position at price 1.3400, what will happen if the price goes up or down 20 pips?
 -  100:1 leverage in a standard account, you will buy 5 standard lots at price 1.3400
If the price goes up 20 pips: you will gain 20 pips; pip value= $10
Profit= 10*20*5=$1000 .
If the price goes down 20 pips: you will lose 20 pips; pip value= $10
Loss= 10*20*5=$1000.
-  200:1 leverage in a mini account; you will buy 5 mini lots at price 1.3400
If the price goes up 20 pips: you will gain 20 pips; pip value= $1
Profit= 1*20*100=$2000.
If the price goes down 20 pips: you will lose 20 pips; pip value= $1
Loss= 1*20*100=$2000.
-  300:1 leverage in a mini account; you will buy 5 mini lots at price 1.3400
If the price goes up 20 pips: you will gain 20 pips; pip value= $1
Profit= 1*20*150=$3000.
If the price goes down 20 pips: you will lose 20 pips; pip value= $1
Loss= 1*20*150=$3000.

-  400:1 leverage in a mini account; you will buy 5 mini lots at price 1.3400
If the price goes up 20 pips: you will gain 20 pips; pip value= $1
Profit= 1*20*200=$4000.
If the price goes down 20 pips: you will lose 20 pips; pip value= $1
Loss= 1*20*200=$4000.
-  500:1 leverage in a mini account; you will buy 5 mini lots at price 1.3400
If the price goes up 20 pips: you will gain 20 pips; pip value= $1
Profit= 1*20*250=$5000.
If the price goes down 20 pips: you will lose 20 pips; pip value= $1
Loss= 1*20*250=$5000.

So what are the learned lessons from the above example?

We have seen that by increasing the leverage value reaching up to 500:1 you can make $5000 in 20 pips movement in the market if and only if the market goes in your direction, but what if the market goes in reverse direction? The answer for this question is that you will lose all the funds in your trading account by this 20 pips movement.

So you and you alone can decide which leverage will best suit your trading strategy, and the selected leverage must be utilized in different market situations with proper money and risk management strategy to avoid any un-necessary results may occur.
To conclude this illustration; always bear in mind that greed is the opposite word of success and that "leverage" is a double edged sword, so learn how to use your sword in the direction that does not harm you.