Comments on: Forex and Leverage, what is it really all about? http://www.plentyofluck.com/forex-and-leverage-what-is-it-really-all-about/ Mon, 12 Dec 2011 15:08:36 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Make Money Trading Commodity http://www.plentyofluck.com/forex-and-leverage-what-is-it-really-all-about/comment-page-1/#comment-1170 Make Money Trading Commodity Mon, 03 Nov 2008 02:35:00 +0000 http://www.plentyofluck.com/forex-and-leverage-what-is-it-really-all-about/#comment-1170 <strong>Make Money Trading Commodity...</strong> I can't believe that I missed your point, I will have to do some research on this.... Make Money Trading Commodity…

I can’t believe that I missed your point, I will have to do some research on this….

]]> By: Jonty http://www.plentyofluck.com/forex-and-leverage-what-is-it-really-all-about/comment-page-1/#comment-101 Jonty Fri, 30 Nov 2007 01:30:42 +0000 http://www.plentyofluck.com/forex-and-leverage-what-is-it-really-all-about/#comment-101 Under the heading of futures trading you refer to "putting down as little as 2% or 80:1 leverage". Not sure if it is a typo or legitimate error. As I have it the 2% is the margin requirement and 2% margin will allow leverage of 50:1, not 80:1. In this article there is a very important omission of two small words which has been omitted from forex websites for very long but recently it started to appear and I guess it came from regulatory pressure. These two words are "up to". In the forex market you can trade with leverage "up to" 100, 200, 400:1. The reason is that effective or real leverage isn't the maximum you can get because in forex your loss is not limited to say 1% (100:1) if your capital. In fact you put down all your capital as margin (it is in the broker's account in any case) and your leverage is the relationship between your total capital and the size of the position you trade. So if you have a $10,000 account and trade GBPUSD of 100K the leverage = 100,000*exchange rate (2.00)/10,000 = 20:1. It is really irrelevant that the broker wants only 1% or 0.5% or 0.25% margin. The illusion is created that even if you trade one, two or three lots you trade with the same amount of leverage, which is nonsense and the cause for lots of wiped out accounts. Under the heading of futures trading you refer to “putting down as little as 2% or 80:1 leverage”. Not sure if it is a typo or legitimate error. As I have it the 2% is the margin requirement and 2% margin will allow leverage of 50:1, not 80:1.

In this article there is a very important omission of two small words which has been omitted from forex websites for very long but recently it started to appear and I guess it came from regulatory pressure. These two words are “up to”. In the forex market you can trade with leverage “up to” 100, 200, 400:1.

The reason is that effective or real leverage isn’t the maximum you can get because in forex your loss is not limited to say 1% (100:1) if your capital. In fact you put down all your capital as margin (it is in the broker’s account in any case) and your leverage is the relationship between your total capital and the size of the position you trade. So if you have a $10,000 account and trade GBPUSD of 100K the leverage = 100,000*exchange rate (2.00)/10,000 = 20:1. It is really irrelevant that the broker wants only 1% or 0.5% or 0.25% margin.

The illusion is created that even if you trade one, two or three lots you trade with the same amount of leverage, which is nonsense and the cause for lots of wiped out accounts.

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