I need help understanding leverages.
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  1. #1
    Join Date
    Dec 2006
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    Lightbulb I need help understanding leverages.

    I dont understand leverages. i dont know which is best for me and why having too much can be risky. help please.

  2. #2
    Join Date
    Nov 2006
    Location
    Texas
    Posts
    9

    Default Leverage



    http://www.babypips.com/school/margin_defined.html

    check this Web address out and it may help you with the leverage question...

    One of the rules with trading is : Don't trade no more than you can stand to lose.


    Happy trading!

  3. #3
    Join Date
    Dec 2006
    Posts
    99
    thanks. i just finish reading the defination and i realized the problem is that i am mixing up leverage ratios with margins. higher leverage means the cost of each pip goes up so i make more money but i have a higher risk. Am i getting this correct?

    100:1 leverage is the same as 1% margin.
    in a mini account lot size is $10 000. so for every $100 i have trade $10 000. right?

    now whats the lot size for the micro account? wild guess... is it $1000? so that would be for every $10 i have i get to trade $1000 of my broker's money?

    im not new to trading,shamefully. i just never took the time to understand how i was making money and lossing money. i hope im finally understanding this thing. lol
    Last edited by honeb; 12-06-2006 at 02:29 PM.

  4. #4
    Join Date
    Dec 2006
    Location
    Colorado, USA
    Posts
    142
    Imagine buying stocks @ $10 / share. With your $100 you can only buy 10 physical shares. In the Forex market, as a trader we have huge leverage. For example if you buy 1 contract on a standard 100K account, you control 100,000 currencies for only $250 depending on the dealer of your choice. Leverage is the tool of investors but it also carries certain risks. This is where you need to know your numbers (entry point, exit point, stop loss, target price, capital, etc) That's why before we enter into a trade, we have already calculated the risk/reward ratio.

    Simply put, leverage is the ability to trade with borrowed funds. Leverage is a tool by which traders can determine the level of risk -- and thus, the potential reward -- they assume in the market. The more leverage used, the more volatile the trader's percentage return of profit or loss can be.

  5. #5
    Join Date
    Dec 2006
    Posts
    99
    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.

  6. #6
    Join Date
    Dec 2006
    Posts
    7
    Quote Originally Posted by honeb View Post
    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?

  7. #7
    Join Date
    Dec 2006
    Posts
    440
    guys

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

    http://www.forex-trading-explained.c...l1goforex.html

  8. #8
    Join Date
    Jan 2012
    Posts
    7
    if you are not understand yet, take a look this video : youtube.com/watch?v=4HsVr9S4ItE

  9. #9
    Join Date
    May 2012
    Posts
    143
    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
    Quote Originally Posted by bmystic View Post

    Leverage and Margin Defined | The Number 1 Cause of Death of Forex Traders | Learn Forex Trading

    check this Web address out and it may help you with the leverage question...

    One of the rules with trading is : Don't trade no more than you can stand to lose.


    Happy trading!

  10. #10
    Join Date
    Jan 2014
    Posts
    13
    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.

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