i plan on opening an account within the next week or so with $1000 but im not sure how leverage works. im going to go with ibfx and they have 50:1 leverage. not quite sure what this means.
Then don’t open an account until you understand it.
I’d tell you what your leverage does, but to be honest, there’s an awful lot of pieces that will still be missing.
Head up to the top of the page, and select the “School” tab. But keep your money in the bank for now.
If you MUST open and account, open a $100 micro account, and keep your other $900 out of it until you understand what you are doing.
I’m not trying to belittle your efforts, I’m trying to save you money.
Try Demo Trading until you get the feel for leverage. The problem is there is a lot of hype out there telling you all the good things leverage can do. Demo trade so that you can see all of the Bad things it can do as well :43:
If you don’t even know what is leverage than don’t open a live account…You may end up losing all of your beloved money.
Basically leverage is how much you can lose on opened positions nothing more, is not exactly a borrow. Since we have micho and nano lots leverage is not much necesary, i mean it is necesary but 1:10 is more than enough.
Going back to theory, let’s suppose you have 1:1 leverage, broker borrows you 1 usd for each you have deposited, remember, your deposit does not go to trading directly, it is just a guarantee to cover loses,nothing more. You still can place big orders with that leverage but let’s say you have deposited 100 USD and for each order the broker allows you to lose only 1 USD, if your account drops to 50 USD now you are only allowed to lose 0.50 USD.
Now if you have 1:10 leverage with the same 100 USD deposit, now you can lose up to 10 USD. Let’s say you lose 10 USD now 90 USD is your new equdity balance and you are now allow to lose 9 USD with opened positions. If your balance drops to 50 USD now you are allowed to lose 5 USD. See the picture now? It can be a benefit if you apply money management correctly, normally good traders don’t use more than 1:5, it all depends on SL level, take my advice never risk more than 1% of your account. Me persanally i use 25 pips SL with Cable and try not to use more than 1:1 leverage. The only advantage we get from it is other idiots to use it and add liquidity to the system because exchanging currencies in the traditional way is impossible, you would need at least 10 000 USD if you wanna overrule commisions and see at a dollar of gains.
Regards.