As advertised store
How to put the codec

What is leverage in Forex

What is leverage in Forex

In recent years, many are interested in trading on the stock exchange Forex.

In this case, we need to know the basic concepts of the foreign exchange market, among which is one of the key leverage.

Leverage: concept and essence

As a rule, no novice traderthe required initial deposit for trading on the stock exchange. Therefore, the trader gives him credit, which is calculated as a percentage of the amount of the deposit. This credit is called Leverage - is the ratio of the deposit amount to the currency amount or ratio between the collateral and borrowed funds.
It is trading with borrowed funds receivedthe name of the margin. In practice, the minimum leverage is 1: 1, maximum - up to 1: 500 (it is called a ceiling or maximum permissible). The greater the leverage, the higher the size of credit.
When opening an account in forex it is important tochoose the leverage, because the greater the leverage, the greater the risk of loss of deposit. Today leverage enjoyed almost every broker other than the big players, such as banks.
Trader can choose the Leverage withhe prefers to work a minimum leverage value for it - 1: 1, but it can choose any shoulder within the set ceiling value. Leverage 1: 500 is the most aggressive and is only suitable for small deposits (up to $ 1,000). The most balanced risk parameters and yields a 1: 100 leverage.
In addition to the risks, when choosing leveragemust take into account such parameter as the duration of the transaction. For short periods of time profit from the transaction, the higher the larger the value of one point. Thus, you can choose a larger size of leverage. For long periods of standing shoulder to choose no more than 1:50 or 1: 100.

Examples of the use of leverage

How does leverage work in practice? For example, if the value of the leverage of 1: 100 with a broker should be the sum of $ 10, so it can carry out transactions in more than 100 times - 1000 dollars. If the leverage is equal to 1:50, the broker with the amount of the deposit of $ 10 can make transactions up to 500 if the 1: 1 - that no more than 10 dollars.
What happens to the deposit in the Forex? So, buying 1 lot of the currency pair in the amount of $ 100,000 with a leverage of 1: 100, a trader needs to have a total of $ 1,000. This value will be recorded in the account and will act as collateral. It can not be used until the closing of the transaction. Change of course will affect the capital control, if the price increases by 1 point - money in the account increased by $ 10, it falls - is reduced by the same amount. In any case exceed the amount of your deposit ($ 1,000), the trader will not lose.

Comments are closed.