-

Leverage in Forex Trading

Currency movements are measured in “pips” or fractions of a decimal point depending on the currency involved.
A typical example would be a currency pair like the GBP/USD. When this pair moves 50 pips from 1.9500 to 1.9550, that is just a $0.005 move of the exchange rate. With $100,000 invested, this equates to a profit or loss of $500. Therefore, currency transactions must be carried out in large amounts to take advantage of these small shifts. When you deal with a large amount of money, small changes in the price of the currency can result in significant profits or losses. Hence the leverage offered. A standard lot of this pair is 100,000. $1,000 invested and leveraged 100:1 would allow you to buy one standard lot. In this case, a 1% fluctuation will either double your investment or lose it.
Although brokers offer leverages of up to 200:1, it is not obligatory to use it. In this example, a $10,000 investment leveraged 10:1 instead of $1,000 leveraged 100:1 offers the same amount of profit/loss. A tenth of the profit compared to the amount invested, but a tenth of the risk.
- Subscribe to Groups Team at www.hotmazia.com Desi Sexy Actress by Email