How To Do Use of Leverage in Forex

1. How To Do Use of Leverage in Forex

2. Index • What is Leverage? • Advantage of Using Leverage • Use of Leverage in Forex • Leverage Amounts • 50:1 • 100:1 • 200:1 • 400:1 • Professional Traders and Use of Leverage in Forex

3. 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.

4. 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.

6. 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.

7. 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.

8. 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.

9. 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 50:1, 100:1, 200:1 and 400:1.

10. 1. 50:1 • 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 50:1 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.

11. 2. 100:1 • 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.

12. 3. 200:1 • 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.

13. 4. 400:1 • 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 400:1 on mini lot accounts. I would personally be wary of any broker that provides this type of leverage for a small account.

14. Anyone making a $300 deposit into a forex account and trying to trade with 400:1 leverage could be wiped out in a matter of minutes.

15. 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 10:1 or 20:1.

16. 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.

17. 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.

18. Thank You