Quick question on leverage(gearing)

Beginner Questions
1

Simple Question, Do you calculate leverage based on your base currency, or your purchased currency?

Example:
Account Balance: $1000 USD
Rate EUR/USD: 1.3200

Current Position:
Long 5000 Units
6600 USD Exposure (1.32 x 5000 units)

Would my leverage(gearing) be 5x (5000 units/1000 USD) or 6.6x (6600 EUR/1000 USD)?

2

6.6x, always in your account currency.

but to be more accurate it’s 5000 euros, with a value of 6600 USD. For your account all your leverage is based on the USD value of whatever contracts you are holding.

3

So my gains/losses isnt the same as my leverage. I think that is something I just started to assume somewhere along the line. I guess this would be because US isnt the base currency in this pair?

My leverage is 6.6x but im losing or gaining $.50 US a pip (not $.66)

Thanks again!

4

Leverage—>Determines Purchasing Power

Position Size—>Determines Pip Value

all values calculated should be in your account currency

5

I don’t think about leverage at all, you just calculate your stake from the amount per PIP you put on a trade. All you need to calculate leverage for is to find out what is the maximum you can wager.