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  1. #1
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    About trading leverage.

    You may see, in Forex trading there is an option trading ‘leverage’. You will see the option 1:100, 1:200 or 1:400 trading leverage for you. This is the money that is given by from your trading broker. Suppose, you are investing only $100 as your live trading capital and then use 1:500 option as your trading leverage then your money’s worth will be $5000. Actually, in this case for every one dollar your broker gives you 500 dollars.

    Now the vital question is, why trading brokers give us leverage facility?
    Really, it is important to know why trading leverage is given to me. First of all, you need to know what is trading spread. The trading spread is the amount of pips between the bidding price and the asking price. Whatever, you buy or sell a trading currency pair, your order executed on the ask and big prices and broker make a small profit of 1 to 3 pips (usually). So, if you invest $100 with trading leverage 1:500 of your broker, then your broker will get 100*500*3 pips.

  2. #2
    Kevin Pietersen
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    In financial market, trading leverage is a general term for any technique to multiply gains and losses. Common ways to attain leverage are borrowing money, buying fixed assets and using derivatives. Important example are: A public corporation may leverage its equity by borrowing money. The more is borrows, the less equity capital is needs, so any profits or losses are shared among a small smaller base and are proportionately large as a result.

    A business entity can leverage it’s revenue by buying fixed assets. This will increase the proportion of fixed, as opposed to variable, costs, meaning that a change in revenue will result in a large change in operating income. Hedging funds often leverage their assets by using derivatives. A fund might get any gains or losses on $20 million worth of crude oil by posting $1 million of cash as margin.

  3. #3
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    I think with this trading leverage, the ability of our transaction can be multiplied far above the actual funds that you have. Trading leverage allows us to gain a huge advantage in every Forex transaction. But on the other hand, if the price of market moves against us then the loss of transaction that will be obtained, will be very large and very dangerous. Actually, risk factors are very large losses should be a primary consideration, more than the possibility of profit. Therefore, it is very dangerous if we do the transaction solely on the basis of availability and possible profit margin.

  4. #4
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    Basically, leverage is borrowed money which you borrow from your broker. It makes you shorter amount into bigger one to invest. By using it, we can trade bigger than our original trading strength. But, on the other hand it is also a tool to destroy your trading balance. Because, if your trade moves against you then it would have been if we have not been over leverage.

  5. #5
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    Quote Originally Posted by Marcus Reilly View Post
    Basically, leverage is borrowed money which you borrow from your broker. It makes you shorter amount into bigger one to invest. By using it, we can trade bigger than our original trading strength. But, on the other hand it is also a tool to destroy your trading balance. Because, if your trade moves against you then it would have been if we have not been over leverage.
    Hello M Reilly; I really agree with you! By the way, may I know how much trading leverage you are using actually? I am really interested to know!

  6. #6
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    Quote Originally Posted by Andre Silva View Post
    Hello M Reilly; I really agree with you! By the way, may I know how much trading leverage you are using actually? I am really interested to know!
    Well; I started my trading with 1:400 trading leverage! Frankly, when I was a new Forex trader then I was interested in high trading leverage! But right now I’m not! Even, now I am trading with only 10% monthly target although my initial target was almost 25%! Whatever, now I am working with the 1:100.

  7. #7
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    Quote Originally Posted by Marcus Reilly View Post
    Well; I started my trading with 1:400 trading leverage! Frankly, when I was a new Forex trader then I was interested in high trading leverage! But right now I’m not! Even, now I am trading with only 10% monthly target although my initial target was almost 25%! Whatever, now I am working with the 1:100.
    Thank you very much for your quick response! Interestingly, I am also working with the same parameter! I actually set this leverage according to my strategy’s requirement.

  8. #8
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    Quote Originally Posted by Andre Silva View Post
    Thank you very much for your quick response! Interestingly, I am also working with the same parameter! I actually set this leverage according to my strategy’s requirement.
    You are always welcome mate! I see, you are very active member here with the good stuff! Keep it up, hope for the best.

  9. #9
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    Quote Originally Posted by Marcus Reilly View Post
    You are always welcome mate! I see, you are very active member here with the good stuff! Keep it up, hope for the best.
    Thanks a lot for your compliment! Surely, I’ll be active more. By the way, this community is my favorite! That’s way, I like to guide the new traders according to my early trading mistakes.

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