How To Calculate Forex Leverage

Discussion in 'Forex - Currencies Forums' started by Duong, Feb 19, 2019.

  1. Duong

    Duong Active Member

    Joined:
    Feb 2019
    Posts:
    28
    Likes Received:
    0
    In simple terms, leverage is the ability to be in control of a huge sum of money without spending too much money yourself and borrowing the rest instead. So, I figured some traders would love to know how to how to do a simple leverage calculation so that they can use it wisely.

    For instance, a leverage ratio of 100:1 means that you, as a trader can trade up to $10,000 worth of currency by making a deposit of $100. This is on a higher side but you get the point, right? Most brokers allow only up to a 50:1 ratio to limit risk. For example, Forexchief broker and they allow up to 1:400 even on stocks. That does not mean you should use 1:400. The higher the leverage, the more volume you can buy. When you increase your trade volume your pip value is high, you profit more and you lose more. The risk is automatically increased when you use higher leverage and lot size.

    This concept is huge in the forex market and is utilized by both companies and investors. Investors use leverage to increase their returns on investment by making profits on fluctuations in exchange rates of two different currencies. Likewise, companies use it to finance their assets so that instead of utilizing stock to get capital, they maximize on debt financing in order to increase the value of their shares.
     
  2. Yordan

    Yordan Member

    Joined:
    Feb 2019
    Posts:
    16
    Likes Received:
    0
    [QUOTE=" For example, Forexchief broker and they allow up to 1:400 even on stocks. .[/QUOTE]

    1:400 on stock assets? I have been looking for a broker that offers that. Thanks for the info. How long have you been trading with that broker?
     
  3. Duong

    Duong Active Member

    Joined:
    Feb 2019
    Posts:
    28
    Likes Received:
    0

    Just a couple of months. You should check the spreads too, you'll like what you see.
     
  4. fxstreet

    fxstreet Well-Known Member

    Joined:
    Nov 2017
    Posts:
    46
    Likes Received:
    0
    Forexchief has some attractive trading conditions. Yes, they offer 1:400 leverage, but you don't have to use up to that. With proper money management system, you can increase and reduce your leverage depending on your trading strategy and how much capital you have. Their spreads are also very low all round assets.
     
  5. Yordan

    Yordan Member

    Joined:
    Feb 2019
    Posts:
    16
    Likes Received:
    0
    What is the risk factor associated with this, because for sure there should be some dangers to it?
     
  6. fxstreet

    fxstreet Well-Known Member

    Joined:
    Nov 2017
    Posts:
    46
    Likes Received:
    0
    If you increase your leverage, you have the opportunity to increase your trade volume or lot size with lower capital. This will also increase your pip value. If your pip value is $2 per pip, then you profit will be huge. Your loss will also be huge as well when you increase trade volume or lot size. High leverage could mean higher transaction volume = higher pip value. You win more or loose more.
     
  7. Yordan

    Yordan Member

    Joined:
    Feb 2019
    Posts:
    16
    Likes Received:
    0
    Hmm, it is definitely straight forward. Thanks man for the explanation, I'll always keep this in mind.
     

Share This Page