can usually get much higher leverage than you would with stocks. For example, if you have 10,000 in your account, and you open a 100,000 position (which is equivalent to one standard lot you will be trading with 10 times leverage on your account (100,000/10,000). Leverage Amounts, leverage is usually given in a fixed amount that can vary with different brokers. Like any sharp instrument, leverage must be handled carefully once you learn to do this, you have no reason to worry. (For further reading, see " Place Forex Orders Properly. Why is there a margin rate and what the heck is free usable margin? This is because the investor can always attribute more than the required margin for any position. As you can see, margin is not a fee nor is it a transaction cost. If you have an account and the broker offers margin, you can trade.
This is why currency transactions must be carried out in sizable amounts, allowing these minute price movements to be translated into larger profits when magnified through the use of leverage. Since most traders do not use their entire accounts as margin for each of their trades, their real leverage tends to differ from their margin-based leverage. The problem is that you can also lose a considerable amount of money trading with leverage. If you have 1,000 in your account this means that you can control 100,000 in positions. In trading, we monitor the currency movements in pips, which is the smallest change in currency price and depends on the currency pair. What you dont know cant hurt you. The only time leverage should never be used is if you take hands-off approach to your trades. These movements are really just fractions of a cent. Otherwise, leverage can be used successfully and profitably with proper management. Lets assume that you have a 5000 account and you risk 2 on each trade. Be wary of any broker that offers this type of leverage for a small account. Say you put a 25 down payment of 50,000 on a house worth 200,000, you are effectively using leverage here!
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