Leverage is the use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.
As the leverage increases the trading operations start to carry different risk levels. The difference between the size of an operation and the funds from a risk-management perspective must be taken into account.
Use that leverage and have the ability to invest 100 times your initial deposit.
Market participants do not pay any commission to use leverage.
The maximum leverage depending on the regulatory authorities of brokerage firms may vary on different financial tools.
Leverage does not affect the profit or loss of your trading operations.
As the leverage decreases the margin rises.
Leverage allows market participants to operate on the main funds.
Leverage that is widely used at FOREX provides an opportunity to get high profit as for large investors so for those who operate with a small amount of money. Other financial markets do not offer such effective investment opportunities.
The market participant obtains a chance to carry large operations with a low margin.
In case of loss of client’s funds as a result of trading, the total loss is subtracted from the margin. When the profit from trading is received the funds are transferred to the client’s account.
Margin is closely related to leverage and lot size.
High leverage reduces margin and increases the risk level.
How is the margin with leverage carried?
When trading at FOREX market a broker separates a specified margin amount from a client’s account to prevent possible loss. The borrowed margin changes according to the size of trading operations and the leverage ratio.
Example:
If a trader wants to operate on 500.000 USD with 1:00 leverage, it is enough to deposit only 5000 USD as a margin. (500.000/100=5000). However, if he wants to use 1:50 leverage the required deposit amount will be 500.000/50=10.000 USD.
We invite you to meet Mekness investment world. You can follow the steps below to be an online investor with us.
You can fill the free demo account form on the side to open an unreal account and try the market without any risk.
You can apply to open a real account to enter the world of investment.
After depositing the initial investment you can easily start to trade.