Leverage is the ability to amplify trading positions by borrowing funds from a broker. For example, with 100:1 leverage, a trader can control a position of $100,000 with only $1,000 of their own capital. While leverage can increase potential profits, it also magnifies potential losses, making risk management crucial. 

Margin is the amount of capital required to open and maintain a leveraged position. It acts as a security deposit that the trader must maintain to keep their position open. For instance, with a 100:1 leverage ratio, the margin requirement would be 1% of the total trade value. Traders need to ensure they have sufficient margin to avoid margin calls, which occur when the account balance falls below the required level due to unfavorable price movements. 

Using leverage requires careful consideration and understanding of its risks. High leverage can lead to significant gains but also substantial losses if the market moves against the trader. Effective use of leverage involves setting appropriate stop-loss orders, managing position sizes, and continuously monitoring market conditions to protect against potential losses and ensure that trading strategies align with one’s risk tolerance and trading objectives.