what is leverage in forex part 03 2020 July Updated

How is foreign currency utilized?

Let's say a trader has 1,000 USD in their trading account. In MetaTrader 4, a regular '1' equals 100,000 currency units. Being able to trade mini and micro-lots with Admiral Markets, deposits of this size allow traders to open micro-lots (in 0.01 or 1,000 currency units of a single lot) without leverage. However, traders are usually only looking at about 2% return per transaction, so it's only 20 USD.

That's why many traders decide to use gearings known as financial leverage in their transactions, which can lead to larger trading positions and larger profits. Let's say that a trader with an account balance of $ 1,000 wants a big deal and the broker supplies a leverage of 1: 500. In this way, traders can open positions as large as 5 lots when displayed in USD. In other words, 1,000 USD * 500 (Lever) equals the maximum size of the position, 500,000 USD. Traders can actually request an order of 500 times the deposit.

In this way, if 1: 500 leverage is used, the trader would make 500 USD instead of 1 USD. Of course, it is important to state that the trader can lose money as soon as possible. Now that you understand the definition and practical examples of leverage, let's take a closer look at the application and find out the best gearing level possible in FX trading. Admiral Markets offers various leverages based on customer status through the Admiral Markets Pro Terms.

For retail customers, leverage up to 1:30 for currency pairs and 1:20 for indexes. For professional customers, up to 1: 500 maximum leverage is provided for currency pairs, indices, energy, and precious metals. Users can also participate in futures trading leverage on currencies, stocks, and commodity CFDs. Both retail and professional jobs have their own unique advantages and disadvantages, so it's a good idea to investigate them thoroughly before trading. Find out if jargon is available today. So you can maximize your trading potential and maintain leverage wherever you want!

Leverage for use in Forex

It depends on your trader's strategy and your actual vision for future market movements, so it's hard to decide which level to use most. Experience has shown that the more open the position, the less leverage will be. This is logical because long positions are usually opened when large market movements are expected. However, if you are looking for a long-lasting position, you may want to avoid being 'stopped' due to market fluctuations.

Conversely, when a trader opens a position that is expected to last for a few minutes or seconds, it mainly aims to extract the maximum profit within a limited time. What is the most effective forex in this case? In general, such a person trades small market fluctuations and wants to use the highest margin to achieve the greatest profit, or in some cases the highest possible margin.

From this we can see that the margin ratio is highly dependent on the strategy to be used. To give you a better overview, scalpers and breakout traders are usually looking for a quick deal, so you want to use the highest leverage possible. Position traders often have low leverage or don't trade at all. The desired leverage for position traders usually starts at 5: 1 and goes up to around 20: 1.

When scalping, traders tend to use leverage as high as 500: 1, starting at 50: 1. Knowing the effectiveness and optimal leverage of leverage is very important for a successful trading strategy with a forex trading ratio. In general, traders are encouraged to experiment with leverage within a strategy for a while to find the best fit.

Watch the free webinar here to learn more about why low leverage is good for retailers and the success rates of high and low leverage.

Margin trading encryption

Leverage trading cryptography has become very popular in recent years, and many traders use strategies similar to Forex trading, just like digital currency trading. Many brokers now offer margin trading on cryptocurrency CFDs. This means that traders can guess the price direction of cryptocurrency without owning the underlying asset and without using an unregulated crypto exchange.

Bitcoin leverage trading is also possible. However, when trading the cryptocurrency market as a margin, the amount offered by brokers is more limited as the volatility of cryptocurrency is very large. Admiral Markets allows retail customers to trade cryptocurrency CFDs like Bitcoin with a leverage of 1: 2.

what is leverage in forex part 03