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What is leverage?


yogeshwartyagi

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@Nikhil

If you wanted to increase your profit, it's okay to improve your lot size but you must increase it with calculation how much dollars that you will

allow to loss, there is risk management always. So even you can make higher profits, the risk won't be too high which made your account in

MC condition.

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@wasi

I don't know for sure but as I knew, higher leverage will be lower risk because it will hold more pips and also it will give lower profits too.

As an example , if we used 1:1000 so it means 1 pips = 10 cents then if we used 1:100 leverage then 1 pips = 100 cents (1 dollar).

So lower leverage will make the value of each pips will be higher in dollars.

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@wasi

I don't know for sure but as I knew, higher leverage will be lower risk because it will hold more pips and also it will give lower profits too.

As an example , if we used 1:1000 so it means 1 pips = 10 cents then if we used 1:100 leverage then 1 pips = 100 cents (1 dollar).

So lower leverage will make the value of each pips will be higher in dollars.

A good explanation, I wonder why many people have expressed leverage size as lot size, yet it is different, but the higher it is good for beginners, because it can secure their account even if the profit is too small

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@Boniez

Yes, it is safer but there must be limitation about how many orders that you made. With higher leverages, you can hold higher amount of pips and because of that, many traders opened too much orders so they suffered Margin call.

right, usually with us are given the opportunity to open posis with large lot size, then most of us use it to get the maximum profit, but it would be dangerous if it turns out we were wrong prediction

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it is very dangerous to use this leverage and choose a big one. because you will be tempted to open big lot. although leverage does not necessarily responsible for big lot but it enables the traders to choose big lot. so it is better use small leverage then to minimize our risk.

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@boniez

It will be useless to use higher leverage but if you used high lot size too. It will be high risk too in the end.

What I said, using higher leverage but using normal lot size. It will hold more pips than we used low leverage

with normal lot size but many traders will be more careless because of this condition and they opened too

many orders so the result, its risk will be same.

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i used to not understand what a leverage was. but a few months ago, i learned about it.

 

anyway, based on what i learned leverage is something forex brokers use to make money from.

 

you can win a lot, you can also lose a lot. choose the leverage level wisely.

 

You said it rightly - the more leverage help traders trade many times more than their actual capital,

and the bigger trades certainly help broker to earn more in form of spread...

Yeah i agree more leverage can be risky so chose it wisely.

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  • 6 months later...

I think there needs to be some forex searching before you post on issue that you are not clear with. Leverage can affect a traders volume and leverage in a simple form is borrowed funds. In other words, a high leverage means that we have borrowed a lot and can take trades with lot sizes that the money we initially deposited cannot take. Leverage therefore can amplif gains and can amplify losses. That is why it is called a two-edged sword.

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  • 5 weeks later...

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.

 

Wow,thanks very much for that explanation.I have been thinking what is exactly meant by leverage.Now i have know that.I never known that we can still get money from brokers to trade online.I think all these are making trading alot more easier.

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I think there needs to be some forex searching before you post on issue that you are not clear with. Leverage can affect a traders volume and leverage in a simple form is borrowed funds. In other words, a high leverage means that we have borrowed a lot and can take trades with lot sizes that the money we initially deposited cannot take. Leverage therefore can amplif gains and can amplify losses. That is why it is called a two-edged sword.

yeah it can be advantageous or disadvantageous on our side. it has nothing in between. so it is like taking risk also for the hope that you would gain more . but if you loss you would loss more if you have increased your leverage.

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Leverage helps us to trade a good capital in forex with our little investment but i dont think leverages can help newbies in forex who hasnt got experience as they may tend to loose all of their investment which is really painful. Going for lower leverages tends to be better as we get a little loss if we loose.

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Leverage is what many traders use. Without leverage, we will only earn so much money from our trading. Unfortunately, a lot of people over leverage their accounts and as a result, they lose a lot of money. I would advise the newbies to keep their leveraging to a minimum until they have more experience with Forex trading.

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Leverage is what many traders use. Without leverage, we will only earn so much money from our trading. Unfortunately, a lot of people over leverage their accounts and as a result, they lose a lot of money. I would advise the newbies to keep their leveraging to a minimum until they have more experience with Forex trading.

I advice newbies not to trade in real account until they have gain experience in demo account. Because its good to start trading in real account but lets make sure that we already build enough experience via demo account trading as theirs no way we can earn money if we keep on losing in real account because of lack of experience.

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It is really important to have leverage and understand because we go for real trading most of the times we can test the different leverages in the demo account although I have noticed that not all demo accounts have all the leverage of a broker. Well, we can understand this also because it also determines for how long or short our margin will be.

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Well, its really attractive as well as risky. We are glad that they come up with a good decision to have different leverage. That's why now I'm still using and preferred to have 1:1000 leverage and also 1:500 for me to be able to survive the market. As its more dangerous and risky to have 1:1 trading.

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Leverage is just one factor in how you going to manage your funds in forex trading. Because theirs also lot size and account size. Most of use uses 1:1000 leverage. this is good especially if you are doing aggressive trading. In which its either your way or the highway. But I guess its worth it if you have a bonus funds that you can trade that if you loss it you loss your bonus funds but if you make it then you earn good.

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@budado chosing leverage as high as that can cause serious harm to your trading account but the right thing I guess we should all do is to try and minimize our leverage level,so its important to put this into consideartion because the higher the leverage the higher our chance t loos and risk level.

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