Menu
Brokers
MT4 Forex Brokers
MT5 Forex brokers
PayPal Brokers
Skrill Brokers
Oil Trading Brokers
Gold Trading Brokers
Web Browser Platform
Brokers with CFD Trading
ECN Brokers
Bitcoin FX Brokers
PAMM Forex Brokers
With Cent Accounts
With High Leverage
Cryptocurrency Brokers
Forums
All threads
New threads
New posts
Trending
Search forums
What's new
New threads
New posts
Latest activity
Log in
Register
Search
Search titles only
By:
Search titles only
By:
Menu
Install the app
Install
Reply to thread
Forums
Forex Discussions
Forex Education
The use of Leverage & Margin
JavaScript is disabled. For a better experience, please enable JavaScript in your browser before proceeding.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an
alternative browser
.
Message
[QUOTE="Dezenoza FX, post: 207176, member: 84302"] [HEADING=1]What is [B]Leverage?[/B][/HEADING] Technically, leverage is where a trader has a large sum at their disposal while using a significantly smaller amount of their own funds. They effectively borrow the rest from their broker. For example, if you’re trading with a 1:100 leverage, and you have $1,000 USD in your account, you’ve got $100,000 available for trading. Although this sounds like an insanely good opportunity, you must always remember that it’s a double-edged sword. When you trade with a larger amount, as leverage enables you to do, you can open bigger positions and potentially earn larger profits. However, with bigger positions you also have a higher risk whereby your losses could also be larger. [HEADING=1]What is [B]Margin?[/B][/HEADING] It may be easier to understand if you think of the margin as a deposit for the trade that you want to open and maintain. The broker that you’re trading with will keep a portion of your balance to cover the potential loss of that trade. Once you close the position, the margin will be put back into your account. The margin that you need for a trade is normally expressed as a percentage of the whole trade and is called the ‘Margin requirement’. You’ll be given a margin requirement for every trade that you open, and it will vary depending on the instrument that you trade and the broker that you choose to trade with. [HEADING=1]How do you calculate the [B]margin requirement?[/B][/HEADING] Well, the required margin will be a percentage of the size of the trade that you want to open and is calculated according to the base currency of the pair that you want to trade. Using the equation below you can work out how much margin you’ll need for each trade. [B]Required Margin = Position Size X Margin Requirement For example:[/B] You’d like to open a mini lot (10,000 base units) in USDJPY. How much margin do you need to open the position? As the USD is the base currency, the position size (or notional value) is 10,000 USD. Your broker has given you a Margin Requirement of 5%. [/QUOTE]
Insert quotes…
Verification
Post reply
Top
Bottom
This site uses cookies to help personalise content, tailor your experience and to keep you logged in if you register.
By continuing to use this site, you are consenting to our use of cookies.
Accept
Learn more…