Hi all,
Recently completed the school of pipsology, been revisiting it all to make sure my understanding is clear.
Upon revisiting I’ve become slightly confused upon realising my understanding of leverage and margin wasn’t entirely correct.
I originally saw leverage as your account only being set up with a set leverage ratio (Account created at 1:30 leverage and always being this way), however I soon realised that leverage ratio depends on the margin requirement of a pair during an individual trade.
If I am trading two pairs at once, EUR/USD and AUD/USD, with EUR/USD having a 3.33% margin requirement equating to 1:30 leverage and AUD/USD having a 5% margin requirement equating to 1:20 leverage, then what is my account leveraged by as a whole at that point? If I had a $10,000 account what is my total buying power when trading pairs with different leverage ratios?
I understand that if you have a $10,000 account, trading with 1:20 leverage gives you $200,000 buying power with a margin requirement of 5%, in this instance being $500 when trading two standard lots. If you were to only trade 1 standard lot at 1:20 leverage on a $10,000 account, is required margin still $500 or is it $250 as you are only trading half of your buying power?
Apologies if my questions are hard to follow, any guidance would be greatly appreciated.