Forex Leverage and Risk


The presence of leverage in the Forex market increases the chances of greater returns Leverage forex trading site necessary because price changes in Forex trading are small and can be as little as a penny or less Because of the small changes, you have to wait a long time and invest more money to make a profit With leverage, you can get a quicker return on your investment with a smaller initial investment Forex trading When using leverage, you should be cautious when the direction of the currency pair and your investment in the opposite direction, the higher the leverage ratio used the greater the chance of loss of investment engaged in foreign exchange leveraged transactions, or foreign exchange margin trading (the same product different words), in essence, is engaged in the purchase and sale of contracts First, the international quotation of foreign exchange are five digits, in the case of the euro, the euro / forextradingwebsiteonline. forextradingbrokerwebsite. dollar cashback forex.1820. U.S. dollar 1.1820, which represents 1 euro can be exchanged for 1.1820 U.S. dollars when the euro from 1.1820 fluctuations to 1.1821 or 1.1819, fluctuations of 0.0001, which is called 1 point Second, in the international community, the prevailing basic is this: 1 standard contract worth 100,000 U.S. dollars (100,000 U.S. dollars), a mini-contract worth 10,000 U.S. dollars (10,000 U.S. dollars) a point value is 100,000 U.S. dollars (10,000 U.S. dollars). What is the value of one pip? 100,000 USD X 0.0001 = 10 USD, 10,000 USD X 0.0001 = 1 USD So whether for 1:20 leverage, 1:100 leverage or 1:400 leverage, 1 point of a standard contract is 10 USD and 1 point of a mini contract is 1 USD Third, so 100,000 USD / 20 times = 5000 USD That is to say, to do a standard contract, if it is 1:20 leverage, you need to use your account funds of $5000; if it is 1:100 leverage, you need to use your account funds of $1000; if it is 1:400 leverage, you need to use your account funds of $250 So how much money you have in your account? How much money is still active? How much risk can you withstand?  For example, to account funds 6000 U.S. dollars, buy 1 euro / U.S. dollar down for example (a point 10 U.S. dollars) 1: 20 times leverage: occupy funds 5000 U.S. dollars, account there are 1000 U.S. dollars is active, can resist the risk of 100 points, when the market price fluctuations upward loss of 100 points, the occurrence of margin calls, the system will be forced to close your position (risky) 1: 100 times leverage: occupy funds 1000 U.S. dollars, account there are 1000 U.S. dollars is active, can resist the risk of 100 points, when the market price fluctuations upward loss of 100 points, the occurrence of margin calls, the system will be forced to close your position (risky) 1: 100 times leverage: occupy $1000, there are $5000 in the account is active, can resist the risk of 500 points, when the market price upward fluctuations in the loss of 500 points, when the margin call, the system will be forced to close your position (risk general) 1: 400 times leverage: occupy $250, there are $5750 in the account is active, can resist the risk of 575 points, when the market price upward fluctuations in the loss of 500 points, the system will be forced to close your position (risk general) 575 points of risk, when the market price fluctuations upward loss of 575 points, the system will be forced to close your position when a margin call occurs (risk is small compared to 1:20 and 1:100 times leverage) Finally, we can conclude that: under the conditions of the same account capital, the same number of lots (1 contract is called 1 lot), the higher the leverage ratio, the smaller the risk!