One of the biggest advantages to trading in the foreign exchange market is the ability to take advantage of liberal this enables a trader to use a small deposit to control much larger contract volume allowing one to keep his capital at a minimum while maximizing potential Returns. Are Forex broker that offers 50 to 1 leverage can allow a client to prepare contract size of up to $50,000 for an initial capital of $1000 a broker with 100:1 leverage can enable a trader with $100 margin deposit to trade $10,000 worth of currency. Why this sound very appealing when profit scenarios are considered, bear in mind that leverage can also follow up was account in an instant when risk is not managed properly in order to take advantage of the leverage offered by brokers you need to a lot part of your account to a margin deposit as leverage can compound your wins it can also magnify your losses this is why raiders often called leverage their a double edged sword or a two-way street . Some beginner readers are often blown out of the water at the start of their trading endeavor due to over leveraging or not completely understanding how to manage leverage for Risk. As mentioned earlier , margin referred to the good faith deposit placed with a broker to be able to trade a longer solution and have the broker Borrow the remaining balance. The broker usually pool their margin deposits with that of other trader in order to place its one margin under interbank trade transactions. While leverage is often measured as a ratio of the amount that can be credited to the Amount deposited margin is measured in percentage terms. When the leverage is 100:1 then margin is 1% when the leverage is 10:1 the margin is 10%. These are some of the factors that are taken into consideration by most traders before opening an account with a broker more season traders and aggressive ones are more comfortable with a longer leverage as this would allow them to boost their profit potential on the year tried and tested trade strategies those who are just starting out or more conservative traders tend to go for broker with lowest leverage . Margin is not to be confused with account margin which refers to the total amount of money you have in your trading account use margin meanwhile stands for the amount of money that the broker is currently only in order for you to be able to keep your trade position open the broker credit this amount back to your account when you close your position or undergo a Margin Call a concept that will be discussed in the next section. Thanks.
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