Lots of new traders get into trouble by getting over-leveraged, but what is leverage? The simple way to understand leverage is, think about buying a house but you are only going to own it for a hour because you want to make a quick profit. Ok, you put your $10,000 deposit down and the bank lends you $200,000. So at this moment you own a $210,000 house with a small deposit. The bank has leveraged you to the tune of 20:1.
The house price soon rises to $23,000 and you sell, the bank takes its money back plus a commission for lending it to you. The rest is your profit.
If you want to buy a more expensive house next time then you will have to hold more funds in your account to prove you can afford it if the price falls, this is called margin.
It is no different when trading currencies, except the underlying asset is a FX pair rather than a house and instead of a bank, you are borrowing from the firm itself.