what is leverage

[ryanstar1]

hi i am a newbie and i wish to know what is leverage and how it works?thanks for your replies

[rhodytrader]

Leverage for the purposes of trading is basically about putting on a position larger than your available funds. In the case of forex, your broker allows you leverage by letting you only put up a small % of the position size you want to do.

[Stevecsd]

Here are a couple of websites that let you calculate the cost of a trade for a given leverage percentage.

Do a GOOGLE Search for:

Instaforex leverage calculator

That one the VOLUME they use 1 = 10,000 units of a currency.

Google Search For

Alpari Trader's Calculator

[BABYPIPS won't let me post direct URL links yet.]

The Alpari Calculator uses the more standard 0.1 = 10,000 units of a currency.



These 2 will calculate your price to control X amount of volume of a currency based on the currency and the leverage (1:50, 1:100, etc) you are allowed or want.

These should you understand it in practical terms.

Steven Currie
If you have questions about this send me a private message.

[tensionz]

In forex, leverage is like a loan provided by broker to trader. That is why with a small deposit such as $2000 and a leverage of 100:1, means you have a $200,000 available for trading and you have enough capital to trade one standard lot on a currency. So if you are buying one standard lot (100,000 units of currency) on gbp/usd at the price 1.61000, and it went up to 1.62000, then you will gain a profit of $1000.

[rhodytrader]

In forex, leverage is like a loan provided by broker to trader.

Leverage in forex is NOT like a loan. In stock trading that is exactly what happens - your broker loans you the difference. In forex there is no lending. You are just putting up a surety deposit to protect the broker against losses you may suffer.

[tensionz]

Leverage in forex is NOT like a loan.

"Leverage is a loan that is provided to an investor by the broker that is handling his or her forex account."

How does leverage work in the forex market?

[rhodytrader]

"Leverage is a loan that is provided to an investor by the broker that is handling his or her forex account."

How does leverage work in the forex market?

Thanks for pointing that out. Now I can tell them they've got it wrong. :-)

[Mr Gone]

In simple words leverage is the maximun loss you can have on a single position. If you have 100 usd and trade 0.01 mini lots you are using in theory 1:1 leverage but if you are in a losing position your leverage increases. Take my advice, don't use leverage.

Regards.

[mastergunner99]

In simple words leverage is the maximun loss you can have on a single position. If you have 100 usd and trade 0.01 mini lots you are using in theory 1:1 leverage but if you are in a losing position your leverage increases. Take my advice, don't use leverage.

Regards.

Don't use excessive leverage would be more appropriate.

[Mr Gone]

Don't use excessive leverage would be more appropriate.

Well, if you would open a buy order in GBPJPY since 2011 you would have something like -10 000 pips without mentioning rollover, that is a clear example of leverage too.

Regards.