Connect with us

news

Forex Leverage Explained, and How Much to Use

A common question is how much leverage to accept from a broker, with some offering up to 500:1. That means you can initiate a position valued at 500 times your capital. That could be profitable, or it could wipe out your capital if the price moves 0.2% against you.

A common question is how much leverage to accept from a broker, with some offering up to 500:1. That means you can initiate a position valued at 500 times your capital. That could be profitable, or it could wipe out your capital if the price moves 0.2% against you. 

We aren’t going to use that much leverage, we are going to find a balance where we can still make money, but we aren’t as exposed to catastrophe.

Here’s how to figure it all out. 

Forex leverage is when a broker provides you with more capital to trade with than what you deposited. This increases your “buying power” and allows you to make trades using this larger amount of capital. 

Leverage means you amass profits more quickly than if you just used your own capital.  Losses also happen more quickly. 

In this article, we will look at how leverage works, why forex brokers offer such higher leverage amounts, and how much to take and use.

How Forex Leverage Works

When you check out forex brokers, or open a forex account, you will be asked (or see) how much leverage you are being offered. 

How much leverage you have available to you doesn’t really matter. You decide how much you actually use via your actual trading. 

Leverage is how large of a position(s) you can take in relation to your capital.

Assume a broker offers you 100:1 leverage. You have $1,000 in your account. Multiply your capital by your leverage to get your “buying power”. You can take $100,000 worth of positions (100 x $1,000).

If you have 50:1 leverage, you have $50,000 in buying power. 

Just because you have this much buying power/leverage doesn’t mean you need to use it. 

Assuming you have a $500 deposit and 200:1 leverage. This gives you $100,000 in buying power. That’s a lot on a $500 account. So even though you are able to trade up to 100K of currency, maybe you decide to cap yourself at $15,000, or about 30:1 leverage. You do this by taking position sizes that don’t total more than 15,000 (in your account currency).

Leverage and Margin

You may see leverage listed or advertised another way, as margin. 

Some brokers may say they offer leverage up to 50:1. Others may say 2% margin. This is the same thing. The latter means you only need to put up 2% of your own capital against a trade. 

If you have $1,000 and 50:1 leverage, you have $50,000 in buying power.

If you have $1,000 and 2% margin, you only need to put 2% for a $10,000 trade (for example), which is $200. That means you take up to 5 such positions in order to “spend” your whole $1,000 account. In this case, you are also taking positions up to $50,000.

Remember, you don’t need to actually use all the leverage or margin available to you! regardless of how much leverage you are offered or choose to take, you can opt to use less leverage based on how you trade. And you should!

Leveraged Profits and Losses

So leverage gives you buying power. By extension, that leverage can increase your profits and losses. 

Let’s look at a couple of examples. 

Assume you deposit $100 into an account and have 100:1 leverage. You can have positions totaling up to $10,000 worth of currency. That’s maximum; you can have positions totaling less if you want.

Say you like a trade in the EURUSD. You are going to buy at 1.1320 and place a stop loss at 1.13. Your risk is 20 pips. Assuming you have a US dollar account, each pip of movement is worth $0.10 on 1,000 worth of currency (a micro lot). A micro lot is the smallest amount of currency you can trade with most brokers. 

Note that you have $100, yet the smallest position you can take is 1,000. This means you are already using 10:1 leverage just by trading the smallest positions size. 

You buy one micro lot, which means you are risking 20 pips x $0.10 = $2 of your $100. 

That is good. You are using 10:1 leverage, but your risk is controlled with a stop loss order. Your risk is $2, or 2% of your $100 account. 1% or less is better, but 2% is manageable.

Assume you take a profit at 1.3270, which is a 50 pip gain. That means you made $5 (50 pips x $0.10) on your $100 account, or 5%.

That’s amazing, considering that without leverage this trader would not have been able to place a currency trade because they didn’t have enough capital to buy even the smallest amount of currency available.

Let’s consider a reckless trader. They just want to use their leverage to make some quick money. 

They deposit $1,000 and have 100:1 leverage. They buy the EURUSD at 1.1320, but they don’t place a stop loss. They think the EURUSD is going up, so they are willing to hold the trade until that happens (scary!). 

They buy 100,000 worth of currency. With that much currency, a pip of movement is worth $10. If the price drops to 1.1220, which is 100 pips away, this trader’s $1,000 will be entirely lost (100 pips x $10 a pip). At the time of writing, the EURUSD is moving a bit less 100 pips a day, and most of that movement occurs within about a 10 hour period. So in about 10 hours, this trader could lose their entire account most days, if trading this way. 

On this flip side, if the price rises 100 pips, they make $1,000 (100 pips x $10). They doubled their account.

Brokers Offer Huge Leverage To Entice You

Currencies don’t move like stocks. You will often hear stock swing traders talk about prices moving 20%, 40%, 100% within a few days or weeks of a cup and handle breakout, for example.

Currencies tend to move 1% or less a day, and a 30% move over the course of a year would be a large move. 

That is one of the reasons that forex brokers offer high leverage. The high leverage allows traders to capitalize on smaller price moves using larger amounts of capital. 

There is also another reason. Forex brokers often target clients with small amounts of capital. They do this by offering high leverage and giving traders with less than several thousand dollars the ability to trade. You can’t trade $100 in any other market effectively, but with leverage in the forex market, you can.

Forex brokers know these small accounts will use the leverage. The small accounts will then pay commissions and spreads on the bigger amounts being traded. The broker makes money off all these small accounts.

Most of these small traders won’t last very long, but there is always someone else with $500 or $100 (or maybe even less) willing to give forex trading a try. Small accounts, enticed in by leverage and the chance for profits, are a steady steady stream of revenue for the brokers. Such clients are easily replaceable since there is an endless supply.

Without leverage, those small accounts couldn’t even place a single trade, and the broker’s revenue stream dries up.

How Much Forex Leverage Should You Use

As mentioned, it doesn’t really matter how much leverage you have available to you, because you can always use less.

If you plan to have multiple trades at one time, or you want to day trade, I would opt to take 50:1 leverage.

50:1 should serve most traders just fine.

If you are a day trader, you will likely use quite a bit of leverage for each trade. Assume you have a 5 pip stop loss and risk 1% of your capital on each trade. On a $1,000 account, that means you can lose up to $10. That means you can take a 2 mini lot position (20,000). If you lose 5 pips on 2 mini lots, you will have lost $10, which is the maximum you have allocated for that trade. 

Buying two mini lots means you are leveraged 20:1 on that one trade. 

That still leaves lots of room for another day trade, at the same time, or for a few swing trades. 

Swing trades typically require less leverage because the stop loss is often bigger. 

Assume you deposit $1000, risk 1% ($10 per trade), and take a trade in the EURUSD with a 30 pips stop loss. You can buy 3 micro lots (3 x $0.10 x 30 pips), which will mean you will lose $9 if your stop loss is hit. On this trade, you are using 3:1 leverage. You could have many trades like this using 50:1 leverage. 

Or, you could have a day trade as well as multiple swing trades. 

The smaller your stop loss is, and the higher amount you are willing to risk on each trade, the more leverage you will be using. 

Forex Leverage Final Word

If the position sizes and the pip values didn’t make sense to you, read the position sizing article. 

I would cap leverage at 50:1. That is the legal limit in the US, and there is little reason to take more. You can make a lot of money using a little bit of leverage in the forex market. 50:1 gives you more than enough leverage to swing trade and have a day trade or two at the same time. I rarely, if ever use that much leverage even with multiple trades on at the same time.

As you consider leverage and opening an account, I would also advise NOT to take the deposit bonus that many brokers offer. This can seriously complicate withdrawals down the road. 

In this article, I used pip values for a US account and only used the EURUSD for simplicity. If you have another account currency, or you have a US account but trade currency pairs that don’t have the USD listed second (USD/JPY, for example) then the pips values will be different. Be sure to understand position sizing and pip values for all the different pairs that you opt to trade.

Continue Reading
Advertisement

news

Online Trading platform SIRIX

best-forex-demo

SIRIX|  Online Trading platform SIRIX Review

[yasr_overall_rating]

Everyone that has been trading for some time has most likely traded on the metatrader 4 trading platform of metaquotes. This has been the standard in the industry for the last couple of years.

 

But more and more brokers Like CMSTrader and UBCFX are offering alternatives that might suite certain traders even better then the MT4 as they have a lower learning curve and are designed more intuitive.
One of these platforms is the Sirix Trading Platform.
The Sirix Trading platform is

Sirix, a fully packed trading software with numerous with numerous options and special indicators that are designed by the software company to present you with a personalized trading experience.

Positive features and benefits of the Sirix Trading Platform

Ease of Use: if you are a trader you will be able to access your Sirix trading platform and see all your trades and other information at any place and time. The Web-trader is a fully function trading platform that does not require you to do any download. This has more or less become the norm of the industry and if you for example take the Sirix Trading platform of LegacyFX you will be able to have a download desktop version, a web version and a mobile version.
these in general all have the same functionalities but of course is the mobile version a bit more limited due to the smaller screen real estate.

Indicators and Options: this platform provides build I more than 50 Indicators which for most traders is over kill but it does allow most traders to find the right indications to match their trading behavior and trading strategies.

The Charting Package that Sirix provides is easy enough to understand and gives you as a trader all the information you need, there are different time frames that in combination with the ability to display lines and annotations make this platform feel like it is designed for you.

Social Trading: Sirix has a full feature social trading module that allows you to watch the trades of others which might give you new insights and trading ideas. If you come a across a trader that is particular successful you are able to copy that traders’ trades and create a full automated copy trader,
You as the trader are still in charge and you have the option to trade with lesser or higher amount then the trader you are copying.
In order to use the social trading, you have to open an account with their social trading community.

This can only be done by using a nickname an order to protect you identity. When you are part of the community then you are part of all the brokers that offer this feature to their traders. Meaning you are able to follow a trader that is trading with 12trader while you are trading with account from UBCFX or any other broker that has Sirix.

Now I have to mention that if you look to only trade social then the Etoro Platform is still a better solution s this system is built only for social trading and they have pretty much defined the concept.

 


Sirix Crypto Trading Platform

this is the latest platform that was launched by Leverate.

it focuses , just like the name says more n the trading of cryptocurrencies.

as this company understands that this is the direction where the market is going and more and more traders are asking for trading in Bitcoin or ripple trading to just name a few they have added this feature to the Sirix Platform , this means that every broker that has the sirix trading platform is in theory able to offer trading in cryptocurrencies.

in addition they have launched also a platform that is only trading cryptocurrencies but that will be another review as i have yet to see and play with this system


Conclusion
The Software company Leverate has created a very user friendly platform with inbuilt social trading and news functionality. When they launched this platform in 2012 it was already a good platform but today it rivals the best of them easily.

The Intuitive aspect of this platform is one of the key features and makes the threshold of trading lower for newbies. There is also a fastn amount of Sirix Tutorials out there that will help even the total beginners with the Sirix Platform

Now of the traders that need bots and more indicators then there sis still nothing that beats the metatrader 4 trading platform but for many traders Sirix offers more then enough and makes the trading experience easier then with MT4.
More and more brokers are offering this alongside their other trading platform so you as a trader will come across more and more brokers that have the Sirix Trading platform in their arsenal.

These are some of the Best Broker for trading on Sirix

UBCFX
LegacyFX
12Trader
CMStrader

Continue Reading

news

Who Will Speak at Blockchain & Bitcoin Conference Stockholm?

Who Will Speak at Blockchain & Bitcoin Conference Stockholm?

Bringing DLT Specialists Together:

 

 On September 11, Sweden will host Blockchain & Bitcoin Conference Stockholm organized by Smile-Expo – international coordinator of business events.

The conference will introduce various topics regarding blockchain and will drive attention to the most topical problems of the cryptocurrency market today.

Key speakers:[yasr_overall_rating]

One of the invited experts is the Member of Swedish Parliament Mathias Sundin who is involved in the Tax Committee and the Finance Committee. The specialist has co-founded a revolutionary technological organization Warp Institute and joined financial company Goobit. At the event, the speaker will analyse the power of decentralized systems, evaluating its long-term strenghts.

Head of Digital and Innovation at Landshypotek Bank Merete Salmeling will deliver the presentation, too. She will explain how DLT can be integrated into the real estate, and what advantages it brings.

President of Blockchain Alliance Europe Tanja Bivic Plankar will join the conference as well. Being an initial coin offerings expert, she will share knowledge about ICOs, describe recent innovations in the token sale sphere and talk about the regulatory framework.

Meet the speakers at the Blockchain & Bitcoin Conference Stockholm

Regulatory and legal challenges coming with innovations will also be discussed by Dr. Guenther Dobrauz-Saldapenna – Partner & Leader PwC Legal Switzerland. The speaker is a lawyer, VC investor, and banking specialist. He provides business consultations and has already written 10 books discovering innovative processes, money and technology.

See the full list of Key speakers here

Blockchain & Bitcoin Conference Stockholm is the second crypto event in Sweden carried out by Smile-Expo. The company has already held 40 successful crypto conferences in 25 countries.

Use an opportunity to meet leading DLT specialists, ask questions and learn new topical information about the blockchain industry at first hand at the conference!

Blockchain & Bitcoin Conference Stockholm

Details of the event and registration are available on the official website of Blockchain & Bitcoin Conference Stockholm.

Continue Reading

news

Go Visit the Blockchain & Bitcoin Conference Stockholm

Go Visit the Blockchain & Bitcoin Conference Stockholm

The Blockchain & Bitcoin Conference Stockholm is a highly anticipated crypto event in Sweden.  and is being held for the second time.

after the success of the first one they look to make this event a annual one.  since the crypto industry is going more and more out of the shadows and becomes more mainstream you will find that the quality of people involved also grows.

this is clearly displayed in the extensive list of speakers at this event.

Event goals:

bringing together the international business community in order to share their experience of integrating blockchain and cryptocurrencies; discussing blockchain industry issues and finding ways to solve them; encouraging a balanced growth of the cryptocurrency market.

Conference topics: 

  • blockchain in various sectors: energy industry, real property, newsmaking etc.
  • Legal regulation of the blockchain sector
  • token models and their application
  • ICO regulation.

Speakers:

the list of world-renowned blockchain experts, including government officials, foreign investors, entrepreneurs, lawyers, and developers is impressive and should get this event the notice it deserves.

Meet the speakers at the Blockchain & Bitcoin Conference Stockholm

who should not miss this Event :

investors, business people, lawyers, startup founders, and those aiming to launch a token sale.

why should not miss this Event :

:to receive full information with case studies about the blockchain application, to discover how to comply with the legal norms in the blockchain industry, to find business partners, and to enhance your brand awareness.

Prices of the Event

Standard ticket  – 240 EUR

  • Full access to all conference sessions
  • Access to demo area
  • Сoffee breaks
  • Speed networking

Student ticket – 121 EUR

  • Full access to all conference sessions
  • Access to demo area
  • Сoffee breaks
  • Speed networking

A valid student ID should be presented at check-in. No refunds on the day of the event.

Buy Your ticket Now


Blockchain & Bitcoin Conference Stockholm is a part of the series of Blockchain World Events held in 25 countries. The organizer is Smile-Expo International Company.

events around the globe

Continue Reading

Trending