Forex Trading Leverage Explained

Concept of Forex Trading Leverage

In simple words, Leverage is the amount of money supported to the traders and investors by the Forex Broker. For example, if for a trade your investment is of $100 and with $100 you can open a position of $10,000 so where from you get $9,900. Yes, this is the support of the Forex Broker that means you have used the Leverage of 100:1. Brokers provide this support to increase their profit and stand as a good competitor to the other Brokers of the Forex market. Leverage has increased the buying capability and made it easier for the traders and investors to earn good amount from small amount.

Advantages and Disadvantages of using Forex Trading Leverage

The higher Leverage provided by the Forex Broker is the reason why more and more traders are continuously investing in the hope of high gains. Leverage has increased the total Forex investment. These are the benefits of Leverage but as everything has both advantages and disadvantages so same is the case with Leverage also. Yes, Leverage has disadvantages and the main disadvantage of Leverage to the traders and investors is that if they have used the high Leverage and the price starts moving against them then nothing can save them from loosing that trade.

Trading without Stop Loss and higher Forex Trading Leverage is worst

If the traders have not used Stop Loss then the situation becomes worst for them then the higher the Leverage they have used the easier it becomes to wipe out their account with in very short time. It may be possible that when the traders fell asleep in the night after placing a high Leverage trade without Stop Loss, they slept in the hope that the next morning will bring in huge gains for them but the fact becomes just opposite to their hope and their account is left with nothing to trade further. So these situations make us aware about the risk and reward of the Leverage.

Suggestions

It is good to think of high gains but Fxstay broker place your trades keeping your emotions in control. It is advisable to the traders and investors to use Low Leverage and up to that extent only which they can afford to lose in a single trade. Never place any trade without Stop Loss. Stop Loss should be placed after doing analysis either fundamental or technical whichever you find easier and most suitable. Use Low Leverage to have optimum gains with less probability of losses. A Leverage of 10:1 or 20:1 is good to earn profit and keep your trade safe. Some suggestions to the traders and investors are as follows.

Use Leverage not more than 10:1 or 20:1.

Calculate and place Stop Loss.

Liquidate your position as soon as your target profit is achieved. This target profit should be calculated using technical methods.

Depend more on most reputed and highly recommended automated Forex Trading tool to use Leverage, calculate Stop Loss and liquidate your opened position.

Conclusion

Remember, if you are trading in Forex then you are playing that more than 90% of the traders lose so be alert and play wisely.

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