In forex, traders may trade with more capital than the amount they deposited in their accounts. This is simply because of leverage. Leverage allows you to increase your trading potential. For example, say that you deposited €10,000 in your account, and your choice of leverage is 1:100. The math is easy:

10,000 x 100 = 1,000,000
Now, your trading capital is €1,000,000.

Let’s say you buy 10 lots EURUSD at 1.2000, and then sometime later, you close the position 100 pips higher at 1.2100.
You made a profit of 1,000,000 x 0.0100 = $10,000
You almost doubled your account!

Now, say you decide to sell 10 lots of EURUSD at 1.2200, but unfortunately, the exchange rate falls, and you eventually close the trade 50 pips lower at 1.2150.
You made a loss of 1,000,000 x 0.050 = $5,000
You lost half of your capital.

Remember that leverage is a double-edged sword. It allows you to increase your trading capital and have increased profits, but at the same time, it may incur increased losses.