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What Leverage Should I Use For Forex
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Forex leverage is a concept that refers to the use of borrowed money or debt to increase the profitability of the investment for the trader. To increase buying power in the Forex market, traders use leverage as an investment strategy. On the other hand, institutions use leverage instead of raising capital by issuing shares to finance assets and invest in their business to improve shareholder value.
If you want to buy shares but don’t have a lot of capital, it will take some time to start earning full time income. This is where leverage comes in which you can use to make easy profits. This article will discuss leverage in Forex and how you can use it to improve your Forex profits in the shortest possible time.
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Leverage is one of the most important concepts that a forex trader must understand. In the definition of leverage, it is an idea about the use of borrowed capital that traders can use to facilitate their investments. As a result, it increases the potential profit of the trader which can last for a long time. Leveraged trading allows professional traders and traders to use their initial investment to gain access to large position sizes.
For example, if you want to trade forex with leverage, you need to borrow money from a brokerage firm to increase your buying power when placing orders. When you close the trade and make a big profit, the borrowed money is returned to your brokerage firm. You may also be liable for losses if your trade fails. Additionally, it is important to set aside a small portion of your trades as margin to maintain your position.
The first step in implementing Forex leverage control is choosing a broker that offers everything according to your specific needs. FxPro can be a good example and you can use leverage in forex trading in this online trading platform by following the information below.
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Leverage on FxPro works like a general Forex leverage model. Here is all the information about the platform’s application policy.
Once you have joined FxPro, the platform allows you to change it whenever you want. You can achieve this by using the steps mentioned below.
It is important to note that you need to close all open positions first in order to change leverage. Additionally, the maximum raise offered by an online broker may vary depending on the rules and regulations in your area.
Let’s say trader X and trader Y are interested in forex trading and both have US$10,000 as initial capital. The online broker they use requires a minimum margin of 1%. They study the market and analyze the USD/JPY currency pair, they will profit and sell short at 120.
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Trader X gets leverage from the broker at a ratio of 50:1. This means that his position size is US$ 50,000 because:
A single pip for a regular lot is about = $8.30. Therefore, one pip movement is reflected at about $41.50 for five standard lots. Eventually the pip goes up to 121 because both traders are profitable. So both traders earn 100 pips, but the results of both are not the same.
Trader X, with leverage, makes a profit of US$4,150, equal to 41.5 percent of his initial capital of US$10,000. On the other hand, trader Y makes a profit of US $ 415 which is 4.15% of his initial capital.
This time, trader X and Y both have an initial capital of $5,000. This time trader X is using a leverage of 25:1 and trader Y is also planning to use 2.5:1.
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This time the market did not favor the traders and both traders lost 100 pips. Therefore, X’s loss is:
The main reason for investing exclusively in forex trading is the fact that the currency of the major pairs is lower compared to the rest. Low volatility in forex trading occurs because traders are cautious. In addition, if you plan to trade forex without leverage, you will earn between 0.3 and 0.5 percent of your initial capital per month. Not only is the survival rate too low, but you will not be able to meet your short and long term financial and investment goals.
It is important to note that if you trade money without investing, you will also have a small risk in your position. This is because the higher the leverage, the greater the risk. But that doesn’t mean you can’t have an advantage in other types of marketing. Here are the markets you can enter
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