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Discussion in 'General Forex Discussion' started by RH-Calvin, Aug 4, 2020.
What is leverage in trading?
I got this document From FreshForex educational website I hope it helps
In an ideal Forex Market, you can only open trades with Volume of At least 1.
And to do this, you need at least 100,000 in your account.
But as you can see, you are able to open trades with volumes greater than 1, with much less account balance, how is this possible? Well the answer is leverage…
1 is the Standard Volume.
A Standard Volume is Equal to 100,000.
Assuming you has an account balance of $200, and you choose a leverage of 1000:1 with your broker.
Simple math….1000:1 leverage*200=200,000
So with the leverage, although your actual balance is 200, your “leverage Balance” is 200,000. 200,000 is the “leverage balance” you have available to use.
Now, as I mentioned above.
To open a Volume of 1, you need 100,000 as your balance, but since you have a leverage amount of 200,000, you can open a volume of 2 (200,000/100,000)
This means, if you have an account balance of $200 with a leverage of 1000:1, you can still open a volume of 2!
Leverage involves borrowing a certain amount of the money needed to invest in something. In the case of forex, money is usually borrowed from a broker. Forex trading does offer high leverage in the sense that for an initial margin requirement, a trader can build up and control a huge amount of money.
Forex trading is the most famous and profitable business in the world. Anyone can start trading and earn a lot of money from the forex market if they proper knowledge about forex. A reliable broker, strong knowledge about forex, and proper guidance can easily make you earn a lot of money from the forex market. I trade with Eurotrader. They are one of the best brokers I have ever worked with. They never make disappointment to their client.