Simply put: the leverage effect is a multiplier of your trading results. In other words: leverage is the use of borrowed funds to increase one's trading position beyond what would be available from their cash balance alone.

For example:

Leverage: Up to 1:500 (requires a 0.2% margin)

Forex contract size: 100 000 EUR = 1 lot in EUR

Required Margin:  100 000 euros / 500 = 200 EUR