I dont understand why brockers give leverage? why if i put 1$ they give me 200? in 1:200?
Retail forex brokers and CFD providers give high leverage because they’re basically guaranteed to make a profit.
That’s because the majority of their customers lose. The grim truth is that data shows that between 70-80% of retail traders lose. This means that the odds are heavily in the broker’s favor.
And what better way to further increase these odds? Offer higher leverage.
The higher the leverage you use, the higher probability that you’ll blow up your account, allowing them to capture all the money you deposited.
Higher leverage also allows you to take bigger notional position sizes which means brokers can charge you larger financing charges (rollover fees) when you hold positions overnight.
Just because brokers offer 200:1 leverage, it doesn’t mean you need to use it. The high leverage is for their benefit, not yours.
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As i understand i cant just use 5$ from my 100$ acoount to place order when using leverage? they can use funds from 100?
Not sure I understand your question. Providing an actual trade example might help.
For example, what are you trying to trade, what leverage is offered, and what is your account balance?
If your broker won’t downside the leverage, find a new regulated broker who complies with the 20:1 or 30:1 leverage. That gives you a leeway on a small capital balance.
If you’re stuck choose the lowest lot size, e.g. 0.02, for now.
When we trade, we basically trade for the difference in price (CFD trading) no one actually acquires it physically thus, brokers give us leverage so that we can trade more without investing the actually capital which is required to buy a particular asset. For example, If i wish to buy 1 lot (100,000 units) of EURUSD at market price 1.19345 I would need a capital of 100000 X 1.19345 which is 119345 USD. You wouldn’t want to invest this much to gain a tiny bit of profit by trading the price difference. Thus, brokers offer you leverage to reduce your margin requirement. Higher the leverage lesser the margin required.
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Well explained
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It’s a way of attracting new customers to their platforms. If you lose, you will have to pay them a magnified amount. And we all know that chances of making profits are far less than the chances of making losses.
I believe if you are using a regulated broker you wont be in a situation to loose more than you invested.