Forex Leverage

Forex Leverage

Trading in the Forex gives you the opportunity to have more to buy / sell other financial markets. This allows us to operate large amounts of money with a deposit small margin. Some brokers offer leverage up to 400: 1, you can control a position of $ 100,000 with only 25% or $ 250.

This in turn It allows us to maintain our risk capital to a minimum. This feature is like a double-edged sword. If leverage is not used properly it can work as a disadvantage. The more leverage we use, more of our "venture capital" at risk there. Imagine the following scenario: Two operators with the same capital but using different levels of leverage:

Operator A: uses 400: 1 with an account of $ 2,000
Operator B: uses 100: 1 with an account of $ 2,000

 If the two operators open a standard operation (100,000 units), the operator A will have at risk US $ 1.750 (2.000 to 250 = 1,750), while the B operator will only be at risk US $ 1,000 (2.000 to 1.000 = 1.000) *. * There are risk management techniques that allow you to reduce risk capital as stop orders or "stop loss".

 We will discuss this in more detail in the next lesson.

That's why we do not recommend using a higher leverage than 100: 1.

 Remember: the margin is always used as a deposit, the rest of the capital account is at risk.