How To Do Use of Leverage in Forex

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How To Do Use of Leverage in Forex
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Index

• What is Leverage?
• Advantage of Using Leverage
• Use of Leverage in Forex
• Leverage Amounts
• 501
• 1001
• 2001
• 4001
• Professional Traders and Use of Leverage in Forex

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What is Leverage?

• Leverage means to use something small to control
  something big.
• In forex trading, it means you can have a small
  amount of capital in your account to control a
  larger amount in the market.

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Advantage of Using Leverage

• The advantage of using leverage is that you can
  make a large amount of money with only a limited
  amount of capital.
• The problem is that you can also lose a large
  amount of money trading with leverage.
• It all depends on how carefully you use it and
  how conservative your risk management is.

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Use of Leverage in Forex

• Leverage makes a rather boring market incredibly
  exciting.
• Unfortunately, when money is on the line exciting
  is not always good, but that is what leverage has
  brought to Forex.

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• Without Use of Leverage in Forex, traders would
  be surprised to see a 10 move in one year in
  their account.
• However, a trader using too much leverage can
  easily see 10 move in one day in their account.

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• It is important to know that much of the
  volatility you experience when trading is due
  more to the leverage on your trade than the move
  in an underlying asset.

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Leverage Amounts

• Leverage is given in a fixed amount that can vary
  with different brokers.
• Each forex broker gives out leverage based on
  their rules and regulations.
• The amounts are typically 501, 1001, 2001 and
  4001.

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1. 501

• Fifty to one leverage means that for every 1 you
  have in your account you can place a trade worth
  50.
• Example If you deposited 500, you would be able
  to trade amounts up to 25,000 at the market
  using 501 leverage.
• It's not that you should be the full amount
  25,000 in trading, but you would have the
  ability to trade up to that amount.

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2. 1001

• One hundred to one leverage means that for every
  1 you have in your account, you can place a
  trade worth 100.
• It is a typical amount of leverage offered on a
  standard lot account.
• The typical 2000 minimum deposit for a standard
  account would give you the ability to control the
  amount of 200,000.

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3. 2001

• Two hundred to one leverage means that for every
  1 you have in your account, you can place a
  trade worth 200.
• It is a typical amount of leverage offered on a
  mini lot account.
• The typical minimum deposit on such an account is
  nearly 300.
• With 300 you would be able to open up trades up
  to the amount of 60,000.

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4. 4001

• Four hundred to one leverage means that for every
  1 you have in your account, you can place a
  trade worth 400.
• Some forex brokers offer 4001 on mini lot
  accounts. I would personally be wary of any
  broker that provides this type of leverage for a
  small account.

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• Anyone making a 300 deposit into a forex account
  and trying to trade with 4001 leverage could be
  wiped out in a matter of minutes.

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Professional Traders and Use of Leverage in Forex

• Many Professional traders trade with the low
  leverage.
• Keeping the leverage lower protects your capital
  when you make trading mistakes and keeps your
  returns more consistent.
• Many professionals use leverage amounts like 101
  or 201.

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• It is possible to trade with types of leverage
  regardless of what the forex broker offers you.
• You have to deposit more money and make fewer
  trades.

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• No matter what your trading style, always
  remember, just because the leverage is there, it
  does not mean you have to use it.
• The less leverage you use, the better.
• It takes the experience to know when to use of
  leverage in Forex and when not to.

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Thank You