Trading In The Forex Market With High Leverage
January 28, 2010 by Bart Icles
Filed under Forex Market
The foreign exchange or currency market is one of the most attractive places to trade in. It is also one of the most volatile yet rewarding markets where you can invest into. In this kind of market, it is not unusual to find leverages of 100:1 and sometimes, even more. However, instead of discouraging people to trade in the forex market, the number of people who are looking into taking advantage of this high leverage appears to be increasing. The key here is for you to use the high leverage only if you have already calculated and reviewed the different risks associated with high leverage trading.
There are different ways for you to trade in the forex market using high leverages without making the whole process become problematic. But before we dig deeper into high leverage trading, let us first review what leverage means. Leverage is a term used to describe the use of other people’s money in buying and selling currencies or foreign exchange. For example, if a broker offers you a 10:1 average, this simply means he or she is willing to let you borrow 10 times the amount of money in the account so you can make a trade.
To be more specific, if a certain contract has a value of $30,000 and the broker is offering a 50:1 leverage, this simply means you only need to have $600 in your account in your account to purchase the contract. If the value of the contract goes up to $33,000, you can already make a profit of $3,000. This already represents a 10% return on the purchase price of the contract and a 500% return on equity.
You might find these figures to be on the extremes but these large amounts of leverage are quite common in the forex market. This is because the foreign exchange market is the larges and most liquid market in the world and this makes it quite easy to get into and out of a certain position. In this way, you can have more control over how much you can earn or lose in a given trade. This also allows foreign exchange brokers to let their clients benefit from the high leverages.
However, you should keep in mind that it is not always that you will have to trade on high leverages. There are times when you will need to simply sit back and watch all the players do their trades. But if you are quite sure that you have calculated and you can manage the different risks involved in a certain high leverage trade, you can always use such leverage to your advantage.
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It’s true that one doesn’t always have to trade on high leverages. It’s almost like a game of poker where you have to know when to keep your cards close to you.
Till then,
Jean
you should keep in mind that it is not always that you will have to trade on high leverages. There are times when you will need to simply sit back and watch all the players do their trades. But if you are quite sure that you have calculated and you can manage the different risks involved in a certain high leverage trade, you can always use such leverage to your advantage.
if you are in india and want to trade in usd/inr please get registered with kotak securities .com,smcindiaonline .com. you need papers for your address proof,identity proof with two photos for getting registration.give them cheque and they will set your trading limits as per deposit margin available with them.
otherwise locate good company at your place ,talk with them for registeration and trading.
One of the operator asked me to send the money across to them in USA and start trading in minutes time. I don’t know much about currency trading but they said they will offer me a course to get me started. Do I engage in this business??
Many thanks for sharing this useful article with us. Definitely if you want to do well in forex trading ,you should know about stop-hunting zone. A key to becoming a successful forex trader is learning how to apply the various forex trading indicators available.
Many many thanks for sharing this useful article with us. A key to becoming a successful forex trader is learning how to apply the various forex trading indicators available. Thanks for sharing with us.
it is if you understand it, you can make healthy returns – but there are risks. Particularly for the novice investor, though, its been very associated with “scams” in recent years.
One of the primary characteristics of the Forex market is its volatility. Leverage simply makes that already high volatility even higher, thereby increasing your risk by a lot.