Hi everyone i am anewbie that has been studying for 6 months or so but still having trouble with leverag margine and risk reward . I dont know how to set these on the trading platform .EG. How do i set leverage at 2;1 .How do i set lot size and margine.Iknow this may be a silly question but i just dont get it .
Hi jamiestow,
lets take an example. You have 1000€ in your account. If you open a position worth 2000€, e.g, opening 0,02lot of eurusd you trade with 2:1 leverage. I hope it helps.
Adam
First thing is don’t get frustrated. In another 6 months of learning, you probably be laughing at yourself saying I can’t believe I thought this was hard to understand. Next thing when you ask a question, try to be more specific, that way you’ll get better answers. For example a part of your question depends on what trading platform you’re using. Your main problem is you have a couple of terms wrong. So to help you understand and get the answer yourself, go to:
Financial Dictionary | Investopedia and look up definitions of the terms you are using. Keep this site for a reference
Next go here to play around and understand how lot sizes and leverages affect your account.
Forex Money Management
Next go here and type in How to enter a trade on (whatever platform you’re are trading on)
YouTube
Hope this helps
Gp
Q: How do i set leverage at 2:1
A: You don’t. You don’t set anything. It is done for you automatically. You decide how much to buy. If that happens to be 2:1 or 5:1 or whatever, and you have enough in your account to cover the minimum margin, the trade will go through.
Q: How do i set lot size and margin.
A: All trading platforms have a field where you can type in the number of contracts. You have to look at your software. It may say ‘Contracts’. It may say ‘Lots’. It may even just say ‘Amount’. If it has a default number of ‘1’ that nearly always means 1 full sized contract. If the default setting is something like 10,000 that usually indicates it is set up to trade mini-lots not full lots by default. 10,000 would be 1/10th of a full 100,000 unit lot.
A full sized EURUSD contract/lot is 100,000 units of the first (aka base) currency ‘EUR’. If EURUSD was trading at 1.3880 that means the real cost in dollars is 100,000 x 1.3880 or $138,800 USD. If you were approved for leverage up to 10:1 then you could buy 1 full sized contact if you had at least $13,880 in your account
If the number of lots/contracts/amount is set to something like ‘10,000’ that is usually an indication your software’s default setting is set to trade mini-lots. (No one I know could afford to buy 10,000 full contracts of EURUSD. Even at 100:1 leverage you would need $13,500,000 in your account!) A mini-lot is 1/10th of a full lot. So using the example above (divided by 10 to equal 1/10th the size) you would need at least $1,388.0 in your account to buy 1 mini-lot (aka ‘10,000’) of EURUSD at 1.3880
If you try to place an order beyond your leverage/margin limit you will not be allowed to or your position will be closed later (most likely at a loss). So it pays to memorize this stuff. Once you go through it on paper a few times it becomes second nature and you can quickly calculate how much you can afford to buy at what price. Lots of good YouTube videos out there on this too.
Not getting frustrated is a very good first step to take. It takes usually much longer than six months to get around the basics so just keep at it.