LEVERAGE is a "loan" provided to the investor by the broker and is expressed in the form of ratio. Here are some levels of LEVERAGE provided by most brokers depending on the Client's knowledge and experience.
But what do these ratios mean exactly? Lets look at some examples! Say a trader has a capital of 10,000 and is trading with 1:100 LEVERAGE.
Since his LEVERAGE is 1:100, he has a trading capital of 1 million Euros.
If he decides to buy the EURUSD (Euro to U.S Dollar) at 1.3055 and closes his position at 1.3155
he will almost double his capital!
Here's another example of the same trader, but with a different outcome. This time, the trader buys the EURUSD (Euro to U.S Dollar) 1.3055 but closes his position at 1.3005
and almost loses half his capital!
So it's important to remember that LEVERAGE increases your trading capital, proving opportunities for multiplied profits. But it can also multiply your losses too! So use LEVERAGE wisely! Thank you for continuing learning forex in my blog. God Bless you ^_^
No comments: