Forex investment leverage is simply the borrowing of a precise quota of money/cash needed for business. The Forex market has a place of borrowing this amount of money as they are not readily available. The brokers are the best option when trying to borrow money. The Forex market is quite a huge market because with little or no startup capital a serious investor can build an empire. The Forex market has attracted a lot of people due to the singular act that it guarantees higher leverage unlike its counterpart’s i.e. the stock exchange market. This leverage is only acquired not only to buy physical assets i.e. automobiles and real estate but they are also more probable to go for equities and foreign exchange. The leverage in the market is popularly attributed to a double edged sword due to the fact that it enlarges the profit against the losses. In trading, the Forex leverage has become so highly in demand that it's already become a norm.
HOW TO CALCULATE MARGIN BASED LEVERAGE
To do this doesn't require rocket science knowledge to figure out how to find the leverage accrued. The method is quite useful and how it works is spelt out here,
Divide the total transaction rate by the amount of margin required to put out.
Margin based leverage = Total value of transactions/margin required
HOW TO CALCULATE REAL LEVERAGE
To find the real leverage is quite different from the margin based leverage. They include the following as they tend to take into account total trading positions required. They are,
Divide the total face value of open positions by trading capital
Real leverage = Total value of transactions / total trading positions required.
ADVANTAGES OF LEVERAGE TO THE TRADER
There are many benefits of leverage and these benefits could be used to earn huge from the Forex market. The leverage whether high or low can turn the investor into an overnight success if it's properly used. These benefits include the following;
Good rate of return
The trader tends to be financially buoyant as of the time
He or she can use this grants to guarantee a successful career in Forex
The trader can use this leverage as an opportunity to take the massive step towards being a pro in Forex marketing
It enhances the investor’s experience of the Forex market.
For every advantage there's also a disadvantage. The disadvantages are not quite numerous when compared with the advantages. The disadvantages are quite minute to even consider. They include the following;
Uncertainty of return
Inability to pay back
This funds can have an opposite effect
This funds are not readily available
This funds creates poor marketing decisions
THINGS TO KNOW ABOUT THE LEVERAGE
For an investor to gain grants from a broker in the market the trader has to have some basic tools in order to get want he/she wants. These skills can be used to help maximize the probability of gaining this leverage. They include the following;
The trader must be a risk taker
the trader must have good pricing ability
Must be able to handle timelines set by the broker for payback
Must be consistent to gain reputation as a good trader
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.