Please explain leverage

I read some articles about leverage but I am not sure I understand about it. I think:

example: EUR/USD = 1.25628/1.25647 and I want to buy 100,000 EUR ( standard lot), I have to use 100.000*1.25647 = 125,647 USD. If leverage is 100:1, I need 125,647/100 = 1,256.47 USD to trade.

Is my opinion true? Thank in advanced!

Exactly :slight_smile: and if your account equity dropsbelow this… Then your broker will close the position… This is what is known as a “margin call”

Thank you very much!

Assuming that I have 2000 USD when I trade, when does “margin call” appear?

If you only have $2000 to trade, and you are trading 1:100 leverage and are using a standard lot… You would be able to sustain roughly a 75 pip loss before margin call.

Do not trade a standard lot if you only have $2,000 in the account. Use a mini lot of $10,000.

In my example, 1 pip = 10 USD , loss 75 pip = loss 750$, 2000 USD - 750 USD= 1250 < 1256.47 => margin call. I understand, thank you very much!

to be more conservative, hoctrade can trade micro lots with his $2,000 account

Leverage is a boobie trap created by brokers to suck out your money faster and charge more spreads. If you make a good money management you will not need leverage. 1:5 leverage is a little excesive for me, i risk less than 1% per trade.