What is Leverage?
Leverage is Currencies fluctuate daily depending on a variety of factors like economic indicator announcements; it’s used by both investor and companies.
In foreign exchange (forex), investor use leverage to profit from the fluctuations in exchange rates between two different countries.
For traders to aim for any decent returns, leverage is used to magnify these small price movements. Leverage is defined as the ratio of the amount of capital used in a transaction to the required margin.
Leverage is a very important unit of Forex trade, and it is difficulty that you know exactly how it execute and how to access it. It is the term Forex traders use to refer to the ratio of invested amount relative to the trade’s actual value.
If you trade, by using a leverage of 1:100, every $1 you invest is worth $100, so with your $1000 margin you can open a $100,000 deal. So for this example, your $10 profit is magnified to $1000.
Don’t forget, Leverage can be a trader’s best friend when used carefully, and his worst enemy when used recklessly. It is a great tool for increasing profits; in fact private traders rarely trade without it. But you should always keep in mind that the higher the leverage, the higher the risk level.
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