Forex Leverage, what you need to know.
Forex Leverage is basically a financial tool that allows the trader to increase their market exposure (or buying power) to a point that exceeds their actual investment. If a trader buys £1000 if GBP/USD with a leverage of 10:1, it would be the equivalent of having £10000 worth GBP vs the Dollar in thier trading account. This is known by traders of being leveraged by 10 times or by 10:1
If you the trader buy 1000 units at a leverage of 50:1 equivalent to £50,000, their account would have been leveraged 50:1.
Trading forex with high leverages can prove very popular, as their are companies offering leverages as high as 1000:1. So for investing £100 with a leverage of this magnaitude would mean you acutally hold the value of £100000.
Obviously there are benefits and downsides to this. If the price goes up by a small amount you could make a relatively large profit for your £100 position. However £100 leveraged at 1000:1 could be lost very quickly if the price goes down by a relatively small amount.
So as described above, Forex Leverage allows an individual to control much bigger trading positions. Traders can use this offering by a broker as a way to magnify and maximize their returns. As also mentioned above, It’s imperative to stress, that losses are also magnified when leverage is used. Therefore, it is important to understand that leverage needs to be controlled, and leverages offered differ by companies. Please see our Recommended brokers for leverages offered.
Many of our broker partners offer flexible leverage to its clients. You can trade with no leverage at all, or you can trade with a significant amount of leverage of up to 888:1 with XM Forex Trading.
We believe clients have a greater chance of long-term success when using a conservative amount of leverage. Using maximum leverage is more of a bet or a gamble, and you may wish to consider something like Bet365 Financial Betting instead.
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