Leverage is simply the use of borrowed money to obtain an investment. In all cases, you stand to lose more than you have invested. In the stock market, you can trade at 2:1 leverage, which is considered very risky. You can buy twice as many shares as the money you have in your account. If you have a thousand dollars, you can borrow the rest on margin. Thus, in a one point, you can make twice as much money than if you were not leveraged. But it helps traders with little capital to obtain large investment in the market.
Leverage will help us to trade in forex trading using small amount. Try to maximize leverage which has been provided by broker. Surely, use demo account first.
You are right, my friend. Leverage is the amount of money offer by your broker to clients to secure large position even when you only have little capital in your account. I think it helps a lot like you said, especially to those who do not have enough money to start trading.
Leverage will help us to trade with small amount. If we use high leverage, required margin per order will be smaller and if we use low leverage, required margin per order will be bigger. I just use leverage 1:500.
Last edited by Pipzilla; 06-02-2014 at 10:48 AM.
Leverage will help us to trade with small amount. If we use high leverage, required margin per order will be smaller and if we use low leverage, required margin per order will be bigger. I just use leverage 1:500 from TenkoFx.
That's your available leverage, how often do you actually come close to using that though?
What's your average effective leverage ratio?
One pip is 0.0001 of a mini lot or $1000 dollars trading on the forex market, or $1. So if you leverage that dollar by 50:1 one pip movement either up or down represents a gain or loss of fifty dollars. So if you stop out when you are 3 pips up on a $1000 trade you make $150 or lose $150 dollars if you were 3 pips down.
The basic thing you need to remeber when using leverage is if you trade at 50:1 you have the potential to lose 50 times the amount you traded with from your trading account.