What is Leverage?

What is Leverage?

If you don't have a large capital to start trading, you can still invest in the market by using leverage. 

When using leverage, you only deposit a portion of your capital known to traders as margin.

To give you an example,

A 1:50 leverage has a 1/50 or 2% margin requirement which means a  20USD of margin is required to open a position size worth 1000 units or 1 micro lot or 0.01 standard lot.

For every 100,000 units or 1 standard lots, 2000USD of margin is required to open the position, and for every 10,000 units, a margin required is 200USD to open a position of 1 mini lot.

The larger the leverage you use in trading, the smaller the margin required for a trader to open a position. (the maximum leverage that you can apply depends on your Broker)

Leveraged trading can gain you a large profit due to large lot sizes or many positions that you can open but it can also lead to big losses as well. So beware when using leverage!!!

Knowing that you can start investing in Forex even with small capital, you can study now how much you can earn in Forex every time the market moves. Learn what is Pips in Forex.