Page 55 - Module1_Introduction_to_the_Forex_Environment

Module 1 – Lesson 11 – Leverage & Margin closeout

he may decide to deposit a bit more to sustain
a required margin, yet upon depositing the
leverage will be changed and the position
would close by reaching the Stop Out level. leverage amounts

6. risks Leverage is usually given in a fixed amount that
can vary with different brokers. Each broker gives
It is important to state that leveraged Forex out leverage based on their rules and regulations.
trading is quite a risky process and your The amounts are typically 50:1, 100:1, 200:1 and
deposit can be lost quickly if trading using a 400:1.
large leverage. Do try to avoid any leveraged 50:1 Leverage
or high leveraged trading before you have Fifty to one leverage means that for every $1 you
gained enough experience. have in your account you can place a trade worth
$50.
7. professional traders and leverage As an example, if you deposited $500, you would
For the most part, professional traders trade be able to trade amounts up to $25,000 on the
with very low leverage. Keeping your leverage market using 50:1 leverage. It's not that you
lower protects your capital when you make should be trading the full $25,000, but you would
trading mistakes and keeps your returns more have the ability to trade up to that amount.
consistent. Many professionals will use 100:1 Leverage
leverage amounts like 10:1 or 20:1. It's One hundred to one leverage means that for every
possible to trade with that type of leverage $1 you have in your account, you can place a
regardless of what the broker offers you. You trade worth $100. This is a typical amount of
just must deposit more money and make leverage offered on a standard lot account. The
fewer trades. typical $2000 minimum deposit for a standard
account would give you the ability to control
No matter what your style, always remember, $200,000.
just because the leverage is there does not 200:1 Leverage
mean you have to use it. In general, the less Two hundred to one leverage means that for every
leverage you use, the better. It takes the $1 you have in your account, you can place a
experience to know really when to use trade worth $200. This is a typical amount of
leverage and when not to. leverage offered on a mini lot account. The typical
Staying cautious will keep you in the game for minimum deposit on such an account is around
the long run. $300. With $300 you would be able to open up
trades up to the amount of $60,000.
8. what is a margin call? 400:1 Leverage
The most terrible of traders’ nightmares is a Four hundred to one leverage means that for
margin call. every $1 you have in your account, you can place
a trade worth $400. Some brokers offer 400:1 on
A margin call is a broker’s demand to you as a mini lot accounts. I would personally be wary of
client to bring margin deposits up to the initial any broker that offers this type of leverage for a
margin level to keep holding current positions small account. Anyone making a $300 deposit
open. The margin call most frequently into a forex account and trying to trade with 400:1
happens with a move to close your positions. leverage could be totally wiped out in a matter of
Technically, it is important to keep the value of minutes. It’s not as if the brokers force the trader
the account higher than the maintenance only to deposit $300, but if they make it possible,
margin level, otherwise your positions will I suspect that there are also other ways that they
simply be closed, and this will result in a loss will not act in your best interest.
for you. Sometimes giving up on your trade

4