Thread: Margin and Leverage

“leverage” is having the ability to control a large amount of money using none or very little of your own money and borrowing the rest.

For example, to control a $100,000 position, your broker will set aside $50 from your account ( Like In FBS Forex Broker ). Your leverage, which is expressed in ratios, is now 2000:1.

You’re now controlling $100,000 with $50.

Let’s say the $100,000 investment rises in value to $101,000 or $1,000. If you had to come up with the entire $100,000 capital yourself, your return would be a have 1% ($1,000 gain / $100,000 initial investment).

This is also called 1:1 leverage. Of course, I think 1:1 leverage is a misnomer because if you have to come up with the entire amount you’re trying to control, where is the leverage in that?

Fortunately, you’re not leveraged 1:1, you’re leveraged 2000:1. The broker only had to put aside $50 of your money, so your return is a groovy 400% ($1,000 gain / $50 initial investment).

Leverage is really the best thing that is created; it allows traders like me who are unable to invest big, but we have to be really judgmental as to which company to select trading with. I really love to trade with OctaFX, it has great leverage up to 1.500 for all accounts, but the major benefit that I get is the trading atmosphere that I receive is just priceless plus all my trades are executed instantly without ever facing any requotes.

Concept to determine the function of leverage and margin, we can use a calculator trader. traders calculator is a tool that can be used to determine the function of the margin, leverage based lot and currency pairs used.

I use a calculator trader from FBS broker to determine the value of a pip value of my trading plan based on the currency pair that I use

I also do a calculation of margin on each trade based on the leverage that I use so I could find out how much margin is used. I usually use a lot 0.01 and a leverage of 1: 500 when I trade in Armada Markets. with this margin calculator we can calculates the minimum account balance required in order to be permitted to open the specified trade at the selected leverage and lot size.

Trader must understand about margin and leverage in forex. Leverage in forex will help us to be able to start trading in forex with small amount. I also get maximum leverage in TenkoFx. I use that leverage for trading. If we can maximize leverage from broker, we will be able to get maximal result although we just use small amount in forex

Leverages are good but it should be utilised wisely, or else its a loosing game most of the new trader in order to increase the volume use high leverage, but if the make a loosing trade then they have to pay the excess amount.

Leverage up to 1:500: It means you can trade $100,000 (1 lot) worth of currency for only $200. Minimum trade is 0,01 lot, which is $1,000. Leverage leads to an increase in risk but also in potential profit. Now, I am using this leverage on my trade in my broker and i also using Margin calculator to calculating the margin

We can try to maximize leverage to make margin be smaller. In forex, i use 1:500 from TenkoFx to trade in forex. Although i also use small amount, but i keep try to more improve my skills here. I try to learn from experience

"Invite your friend, get $10 and win $5,000"

Most of the traders go for high leverages without realising that if they loose they have to repay in equivalent ratio, its a big risk and has to be utilized wisely.

Originally Posted by orni308

Most of the traders go for high leverages without realising that if they loose they have to repay in equivalent ratio, its a big risk and has to be utilized wisely.

That's right, if we pick a high laverage it mean a high risk too. More higher laverage that we choose it mean more higher risk that we face when we do our trading activity. That's all is why we have to be veru careful when we have to choose that trading condition. I think we should've to test all the laverage available first with a demo account, so we can really know how high the laverage that we have to choose for our trading activity.