Forex leverage and margin very important in forex trading. Let’s discuss leverage and margin and the difference between the two.

1. What is Leverage and Margin in
Forex Trading?

2. Index
1. What is Leverage and Margin in Forex
Trading?
1. Leverage Trading
1. Margin Trading
1. Profits & Losses With Leveraged Trading

3. What is Leverage and Margin in
Forex Trading?
 Forex leverage and margin very important in forex
trading. If the broker gives high leverage, then
you understand margin rules of Forex Broker.
 Let’s discuss leverage and margin and the
difference between the two.

5. Leverage Trading
 Forex Leverages and Margins trading is the
facility to be able to trade for significantly higher
amounts than what you have in the account.
 We can define leverage as the extent of open
positions that you are allowed to create in the
market against a given amount of the margin
deposit.

6.  If the broker is allowing you ‘leverage’ of 50:1,
then it means you only have to put up the initial
margin of 2% of the value of the position you want
to trade.
 Assuming your account currency is USD and
value of the position was $50,000 then the broker
would earmark 2% of $50,000, i.e. $1,000 from
your account towards the margin deposit.

7.  In effect, the broker funded your position for
$49,000 the amount of capital you may be said to
have ‘borrowed’ for position.

9. Margin Trading
 Because of the leverages offered, Margin trading
is a facility provided by a Forex broker to his
clients so they may trade without having to put up
the whole capital required for their position.
 The client is, therefore, trading with borrowed
capital.

10.  However, the broker will always demand a
specific, small deposit of money, called the
margin deposit to be paid by client before the
position can be taken.
 This deposit, which may be as low as 1-2% of the
value of the total position, is the only initial
investment required of the client.

11.  The broker earmarks the amount and sets it
inside the position taken by client.
 When the position is squared up by client at a
profit/loss, the margin is released back, along with
credit for the profit/loss on the transaction.

12. Profits & Losses With
Leveraged Trading
 Leverage is a double edged sword while your
profits would be increased and multiplied with the
same amount, say 50 times in the above
example, same would be right for losses if your
trade goes to the south.
 Hope you understand what is the use of leverage
and margin in trading forex.

13. Thank You