Which explains what happens when currency traders buy on margin?

When currency traders buy on margin, they borrow funds from their broker to increase their purchasing power, allowing them to control a larger position than their own capital would permit. This amplifies potential profits, as gains are calculated on the total position size rather than just the trader's equity. However, it also increases risk; if the market moves against the trader, losses can exceed the initial investment, leading to a margin call where the trader must deposit more funds or liquidate positions to cover losses. Ultimately, trading on margin can lead to significant financial rewards or devastating losses.