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How to deal with the risk of Forex leverage:

Discussion in 'Signal Service' started by arincin, Dec 19, 2017.

  1. arincin

    arincin ECZ Newbie

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    Let's take a concrete example to illustrate this leverage effect:
    Let's say you are investing $ 100 on the EUR / USD cross at 1.25 pips. At the time of closing your position, the EUR / USD cross reached 1.26 pips. Without leverage, your gain can be calculated as follows:
    100 x (1.26 - 1.25) = 1
    You would only earn one euro on this transaction.
    Now imagine the same operation with a leverage of 1: 100. In this case, your actual investment being € 100, you will speculate with € 10,000. Your winnings will then be calculated as follows:
    10,000 x (1.26 - 1.25) = 100
    You would earn $ 100 instead of $ 1.
    What is the Forex market?
    Of course, the greater your leverage, the more the potential gains will be. But this advantage is double-edged since the amount of your losses is also multiplied by the same factor.
    How to deal with the risk of Forex leverage:
    افضل شركات التداول عبر الانترنت
    As we have just indicated, leverage should be used cautiously and cleverly since your losses are also affected by this tool. Thus, with a leverage of 1: 100, the amount of your losses will also be multiplied by 100.
    If we take our previous example and imagine that our cross EUR / USD goes from 1.25 to 1.24 pips, you would lose 1 € without leverage and 100 € with leverage. The more leverage you have, the more you risk losing money.