Jump to content

Exchange Blog Cryptocurrency Blog


All Pips



What is leverage?


yogeshwartyagi

Recommended Posts

Leverage simply means the % amount of money you are allowed to borrow from the broker when you open a position. Typically a Broker would allow you borrow 99% of the total value required to open a trade and you only need to come up with the remaining 1%. So if you are about to trade $10000 then you only need to have $100 of your own. Usually Forex broker won’t charge you interest on the borrowed amount.

Link to comment
Share on other sites

@sirwilly you are quite right - more money availabe for you to buy increases the potential of more profit. So more the leverage more you can trade for.

@yash its not exactly margin - but brokers allows you to buy for several times the margin for example 4 times in your case, and that 4 time thing is the leverage in my knowledge.

Link to comment
Share on other sites

  • 2 weeks later...

With a high leverage, the trader is able to buy foreign exchange worth several times his purchasing power. Most traders will go on a high leverage when their analysis shows a green light and there is little chance to lose. Still, SL should be observed and once the market stats rise, it should trail the new levels.

Link to comment
Share on other sites

This is right leverage allows us to trade several times our capital and enhances amount of profit we get in a single trade,

But simultaneous higher leverage can put our entire capital into risk as if leverage is 100 times and we get a loss of 1% being our capital only 1% we loose everything.

Link to comment
Share on other sites

  • 4 weeks later...

Leverage is what we Brits call gearing. Think of it like the gears on a bicycle. With a high gear you pedal slowly and the bike goes fast. If you come to a hill you go to low gear, pedal fast and the bike goes slow. In stock world there are various forms of gearing.I will come to the one I think you are referring last.

You have financial gearing (leverage) which is the ratio between money the co. borrows (loans) and the money from shareholders (equity).Also operational gearing, which I think is the ratio of workers to output.i.e. the difference between a work intensive industry and not intensive.

 

Link to comment
Share on other sites

Leverage is the important part of the gain Or profit & could effect on loss. High leverage about 1:500 can have big profit with small investment OR/ can go for big loss with big investment.. Thus select the leverage at perfect position is very important for good trader..

I agree with you though the borker allow us to use higher leverage like 1:500

but we should only use such a leverage so that our trade do not close on small fluctuations and due to lack of margin.

Link to comment
Share on other sites

  • 2 weeks later...

Well you can understand it something like this

You deposit 100$ in your forex account and you want trade gold

Now you can only buy very little less than a gram with this much but when your broker gives you higher leverage e.g. 100 he shall allow you to buy for 10000$ so that you get profit even with little fluctuation in rates.

Link to comment
Share on other sites

Looks like i will be learning a lot from this forum.Now that i know what's leverage.I can start trading a demo account firstly,and then enter the real game of profit or loss.But looks to me,that borrowing a huge leverage from broker can make one gain much or loss much..But if we loss all,do we repay the borrow percentage?

Link to comment
Share on other sites

  • 4 weeks later...

actually leverage is not very influential in our failure as long as we are able to manage it as usual, even I've never noticed it every i opened an account

 

yes i think leverage has no effect in increasing our risk. why do i read many members saying our lot will greatly be influenced by our leverage. i don't think that would be the case. so i think that it is safe to use high leverage. just avoid high volume.

Link to comment
Share on other sites

Leverage is facility which is provided by brokers to support traders who didn't have much amount of capitals so they could trade

although only have small amount of capital. For traders, leverage is really important to support them so they could trade in forex

but leverage could take part to increse its risk of losng too.

Link to comment
Share on other sites

The intention behind providing leverage to traders is that they can trade more quantities for their money. Now suppose total cost of a transaction is 1000$ and one enter in trade for +-1% profit/loss, so with a leverage fo 100 your capital can afford upto 1% loss in other words our deposit is just acting as a security for any expected loss.

Link to comment
Share on other sites

  • 2 weeks later...

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

×
×
  • Create New...