Hi there. I am wondering how leverage affects actual profit. Say, i deposit 100$ into account and use 1:100 leverage. Then my balance would be 10000$. If i profit, for example 1000$, can i withdraw this? Is it actual profit or is there any effect of leverage?
No. If your deposit is 100$ then it is still 100$ whatever your leverage is. Leverage has nothing to do with the balance on your account.
All leverage does is specify how much of your 100$ is allotted as a deposit (initial margin) as a percentage of the nominal value of your position. The higher the leverage the smaller the margin requirement.
Therefore all a high leverage does is permit you to open more positions with the same deposit than you can with a low leverage - and that is the danger of opening excessively large position sizes.
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So for me in the US with a regulated US broker,my maximum leverage is 50:1. If I opened a US pair 1000 unit micro lot using round numbers I would have to put a deposit/margin down of $20… 20 * 50 equals 1000
If I used an offshore broker with a leverage of 1000:1 opening the same 1000 unit micro lot, I would have to put a deposit or margin down of $1, 1000 *1= $1000.
As @anon46773462 says, with high leverage, like 1000:1, many beginners will open 10 or 20 1000 unit positions only seeing buckets of money to be made. But usually it’s buckets of money lost and the account is wiped out.
KC
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And there’s your answer @tuulkgm, understand these two nuggets of information above and you’ll be the wiser for it.
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Hate to tell you all of this but the OP only has one part wrong.
His question is can he withdraw $1 000 if he makes $1 000 profit. Answer is yes of course. His balance though would be $1 100 before the withdrawal.
To the OP: all leverage does is it enables you to trade “as if” you have more money than you actually have. But it’s not your money. Well that’s a basic explanation anyway. Leverage does BAD THINGS to NICE PEOPLE (but that’s a whole other story).
As for the rest: would that not be fantastic i.e, deposit $10K with your broker and then put in a withdrawal request for $100K!!! LOL!!! Problem solved. Those bucket shops with 1 000:1 would become REAL popular in an instant!!! LOL!!!
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Well, in the end, the bucket shop brokers are being chosen for such offers even by expert traders.
And you base this insight on what if I may be so bold as to ask???
Based on the fact there are expert traders on myfxbook who have a good track record and are using such brokers.
I see. Well I’ll leave you to that one then.
Actually I won’t. ■■■■it.
First of all: Myfxbook is no yardstick. Not by any means. And second: if you think that the “expert traders” that you see on Myfxbook are indeed expert traders and they’re trading with bucket shops then the wool is being pulled over YOUR eyes. The mere fact that those traders are INDEED trading with those bucket shops means they’re NOT expert traders. And matter of fact: even IF a de facto expert trader were to even bother with those bucket shops (which they would not) those bucket shops would do anything in their power to ensure that they did not HAVE expert traders trading with them. You think a bucket shop WANTS to have to fork out money to a good trader??? By their very definition it’s not their business model. Use the noggin. You think somebody with a $100K or more account is going to run the risk of not being able to withdraw their money??? Or be trading big lots knowing full well that the possibility exists that they’re not going to be able to close out positions until the trades have gone into a loss??? And I’ll tell you something else for nothing: expert traders don’t trade with huge amounts of leverage either so if that’s the “offers” to which you are referring to then you’re again sorely mistaken.
Well, you have some good points there. Thank you!