I need help understanding leverages

ok i think i went stupid again. can someone do an example that compares a 50:1 leverage with 100:1 and 200:1 please. im still not getting it. thanks.

me too, i am still getting confused…can someone please explain?

guys

Have a read of this I think it helps explain a lot

http://www.forex-trading-explained.com/bwnsl1goforex.html

if you are not understand yet, take a look this video : YouTube

Its a very well explained on this website, you can try it out. Its very useful for beginners.
Me too am successful because of this…
Hope this helps dear

In forex, investors use leverage to profit from the fluctuations in exchange rates between two different countries. The leverage that is achievable in the forex market is one of the highest that investors can obtain. Leverage is a loan that is provided to an investor by the broker that is handling his or her forex account. When an investor decides to invest in the forex market, he or she must first open up a margin account with a broker. Usually, the amount of leverage provided is either 50:1, 100:1 or 200:1, depending on the broker and the size of the position the investor is trading. Standard trading is done on 100,000 units of currency, so for a trade of this size, the leverage provided is usually 50:1 or 100:1. Leverage of 200:1 is usually used for positions of $50,000 or less.

If you are a newbie, please take is slow so that you do not blow out your account in one trade.

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.

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.

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.

Understanding effective leverage, account equity, risk management and their relationship is one of the most important aspects of trading currencies.

This article explains everything, very clearly and is an absolute must read for any new trader: Daily FX | FXCM Case Study on Equity, Risk, and Effective Leverage

Hello to the OP!

Bob5star and ForexUnlimited, among others, have put it very well, so I have nothing better to add;

I would recommend, however, that you take a look at leverage from the angle of carry trades, in

that leverage and ‘risk’ express themselves quite clearly in trading one higher-rate pair versus a

a lower-rate pair…

There is an article about this on Olesia’s FX page, although it is not her article but Kathy Lien’s:

Leveraged Carry Trade

I hope this is interesting for you…

Happy 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.

[QUOTE=“CahCuncun;614233”]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.[/QUOTE]

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.

higher leverage means the cost of each pip goes up so i make more money but i have a higher risk.

Cost of Each pip do not go up if you increase the leverage.

Cost of each pip goes up if you increase LOT size.

Do not go over 1:100 at the start. That is the suggestion. Everybody has different levels though.

Different places have different limit on leverage. Some countries have higher and other lower FYI .

Leverage refers to using small amount to control the larger amount of something else. Usually as individuals, we apply leverage to some extent in our usual life. For e.g. you want to buy a small house worth $200,000. Then you might pay 20% of it, i.e. $40,000 as down payment. This down payment is leveraged to allow you to buy a bigger house worth $200,000. Therefore, leverage in this case is $200,000/$40,000= 5 times.

Let’s understand the use of leverage in Forex market. There is a relationship between leverage & its impact on the Forex market. The higher is the leverage, the greater is the volatility of your equity account. The small is the leverage; the small is the volatility of your equity account. In the trading course, we usually talk about using less than 10 times of effective leverage.

When we use higher leverage, a few no of losing trades can usually be compensated by the winning trades.

With leverage trader is able to trade more than he had in his capital he use less amount from his capital and trade a big lot . If leverage is not there we have to trade 1:1 . Then forex will be the business of just rich people. Now small investors can also trade with leverage in forex market.