What is leverage?
Leverage - is a certain amount of credits that a trader can get from your broker for the Forex market. This term is one of the most controversial concepts in the financial market, since, on the one hand, the availability of money, which can get a trader as collateral, significantly increases the possibility of profits, but on the other hand, the failure can be to lose both their and other people's finances and to stay in a big minus.
Plus and minus leverage
In order to better understand how to properly use the opportunity to leverage in the Forex market, you must first understand its very essence. So, to make a profit, for example, ten dollars, if you change one currency quotes, a trader needs to have a sum of not less than one hundred thousand currency units. Of course, not every player can have a similar amount and therefore in the structure of the work on the Forex market and there is leverage, which provides brokerage and enables normal and stable earning. It is an advantage of using the loan. But if used improperly borrowed money can not remain at risk in a big minus, although it is usually too brokerage firms to issue large amounts of banknotes, when it is not confident in the trader's ability to pay.
How to choose the leverage level
At the conclusion of the contract with the broker and the choice of trading conditions is necessary to pay attention to the maximum possible degree of leverage offered. Most often it mutates from one hundred to one in two hundred or even comes to 2000. At these levels of loan finance provided by the trader to profit potential, but is considered to be more rational, especially for beginners, to begin its work with minimal leverage. So we can assume the ratio of 500: 1 or a hundred to one, of course, will not provide a big profit, but will allow to learn to invest borrowed funds correctly.
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