Leverage and Margin
Using Leverage to Increase your Earnings
The Forex market is exciting and accessible to small retail traders because of the industry’s high leverage options. Leverage gives a trader the ability to increase the potential return on an investment. However, leverage works both ways, it increases potential returns, but also increases potential risk.
In simple terms, leverage is borrowed capital that allows a trader to gain access to larger sums of capital. If you invest just a small amount, the profit you can make will also be relatively small. By trading with leverage you can invest as little as $100, but can trade up to $40,000. This can heighten profits and losses and should be used wisely.
The Forex market is exciting and accessible to small retail traders because of the industry’s high leverage options. Leverage gives a trader the ability to increase the potential return on an investment. However, leverage works both ways, it increases potential returns, but also increases potential risk.
In simple terms, leverage is borrowed capital that allows a trader to gain access to larger sums of capital. If you invest just a small amount, the profit you can make will also be relatively small. By trading with leverage you can invest as little as $100, but can trade up to $40,000. This can heighten profits and losses and should be used wisely.
What is Margin?
Margin is good faith capital required to execute an order. The margin is kept by the broker until the orders is closed. After the position is liquidated the margin is credited back to the trader’s account.
