Leverage doesn’t work!?!?

Beginner Questions
#1

Hi guys!

I created two accounts for testing, one with leverage of 100:1, another with leverage of 1:1, and I didn’t see none difference. In the account with leverage, the volume of the operation doesn’t multiplied by 100, and the percent gain/loss isn’t too. With leverage or without, the volume of the operation continue being the same, and the percent gain/loss too.

The ONLY difference that I noticed is that in the account with leverage I can give an orden with volume (= lot) very bigger than I can in the account without leverage. Only this!

So, how you can explain me this fact!?

Thank you,

Henry

#2

Hi Henry.
Notice youve posted a lot of questions, as the weeks go on I would anticipate a lot more.
Can I suggest you study at the free school in here. Each section has its own quiz, so you can check how much you understand as you go along.
Regards

#3

The thing you noticed is the leverage. So it is working.

#4

And about that talk that “if the leverage is 10, so the position size and the gain/loss is multiplied by 10; if the leverage is 100, so the volume of the operation and the percentge gain (or loss) is multiplied by 100”.

Is it explanation is false?

I heard this explanation a lot of times…

#5

If you open, for example, one micro lot in either case then the P/L will be the same, but if you look at the margin required by your broker then you will see that it varies according to the leverage setting. The effect of this is that for a given amount of equity you can open more lots with a higher leverage setting than with a lower setting.

#6

Hi Henry
the thing that is confusing you is that you can read on many websites or broker pages the “promotion” that “leverage is multiplying your volumes and gains…” these are strong marketing words and yes they are in a way right but your volumes and with that your gains/losses will not multiply by themselves. Actually what you need to know about is “margin”.
Margin is the required amount of your funds that is being blocked for each trade in case of losses from the trade. And logically if that amount is smaller you will be able to open more trades and with bigger volumes. With other word then you will multiply your volumes –profits/losses. 1% margin means that to buy 1000 USD (0.01 lots) from your account will be blocked not 1000 but 1%x1000= 10 USD and so you will be able to open more trades with smaller account that is why we say that your account is “LEVERAGED”. 1% margin as in the example corresponds to 1:100 leverage because you are required 100 times less margin as the size of your order.

P.S. be careful with that leverage :). It multiplies not only the profits…

I understand your confusion with all that information noise in the internet
Cheers