Wednesday, July 27, 2011

What is Leverage Meaning in Forex ?

Leverage is level or as we borrow money in the brokerage firm with a certain amount and to provide some assurance that called the margin.

* 1: 1 means the money guarantee is 100% of contract value.
* 1: 50 means money guarantee 2% of contract value.
* 1: 100 means the money guarantee is 1% of contract value.
* 1: 200 means the money guarantee is 0.50% of contract value.
* 1: 400 means the money guarantee is 0.25% of contract value.
* 1: 500 means the money guarantee is 0.20% of contract value.

= Collateral.
Therefore, in the modern forex markets, the level here as example 1: 100, or the means to trade currencies valued at $ 100 _ the capital employed only 1: 100 its only or $ 1 only. $ 1 that is also called as margin (also called a deposit for the purchase of $ 100).

If we do not know about this would say how $ 1 can buy $ 100? Possibly, because it actually could be said BROKERS who spend the money $ 100 is for you. So you only need to spend $ 1 (Deposit Account) to cover the losses and gains from the transaction was $ 100. So $ 1 as a guarantee of $ 100, and the rest of the other account as the agency losses and gains from the transaction.

Collateral (margin) will be refunded to your account balance your portfolio more intact after your order has closed position (close) or clear. Hence the modern forex trading system more attractive to market participants (traders) rather than the traditional market.



Forex market said...

It is a well executed post. I like the diagram most. It is a helpful informative post. Thanks for sharing this great information.

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