What is the leverage?
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What is the leverage?
Leverage or margin loan is the maximum you can pay your forex broker on your capital. Suppose your balance or capital is $ 100. If you use 1:200 leverage, then when you trade, your broker will give you up to 200 times the loan amount. Now it depends on you how many loans you will take. So, with 10 dollars 10×200 = $ 2000 will be able to trade.
Well … if you get a loan up to 200 times, why do not you? The stock market does not want to give a 1: 200 loan.
Suppose you deposit 10 dollars, decide to use leverage, 1: 1, do not take any loan. In that case, the broker will not let you open a big size trade. The big trade that can be opened by those 10 dollars, the same trade will open. In that case, if you move 50 pips on your favor in the market, maybe your 1 dollar profit. Typically different currency pairs move 100-300 pips every day.
So you thought, take a loan and open a big trade so that profits are high. If you offer a broker 1:200 leverage, you can trade $ 2000 with $ 10.And so, that would have gained 200 times more profit than it was before. Similarly, if you used to have 1: 200 leverage in full, then it would be 200 times more likely to be loose.If you had to hit 50 pips in the market before, you would have earned $ 1, now it will be worth 200 dollars.
The broker loan will give you exactly If you have a profit if your loss is equal to your capital, then your trade will automatically close. If you have a capital in any case, the broker will not let your trade run in more losses.It is called Forex Margin Call, in Bangladesh is called Forced Cell.
Bro, it’s a terrible thing! If my loss is equal to the capital when using more leverage, then what would be going on me?
Straight words, yes! So, why not set the leverage, never open more trade in the balance of balance when opening a trade. Some people say that forex or one-day capital is two times, it is possible to multiply. If fortunate, it is possible to be fortunate. But in this way trade with risk is to be eaten at any time.
