Tag: Currencies

Forex leverage explained

Trading Articles
First of all, the word leverage comes from lever. A lever is a simple machine that makes work easier for use; it involves moving a load around a pivot using a force. In other words, lever is a small push given in order to produce bigger impact. Most new traders would notice that forex brokers mention leverage of 50:1, 100:1, 200:1 Leverage is a ratio of amount used in a transaction to the required deposit; a 100:1 leverage means that you can trade $100,000 in currencies with only a $1,000 deposit. If a broker offers you a 100:1 leverage on your $1,000 and you decide to trade a position worth $100,000, that means that you are borrowing $99,000 from your broker (you shell out $1,000). Your trade will be closed (margin call) as soon as your position losses 1% which is the total amount ...