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What is the leverage for forex. com?

Forex trading is a popular investment option for many investors worldwide. The foreign exchange market is the largest financial market globally, with an average daily trading volume of over $5 trillion. One of the most significant advantages of forex trading is the ability to use leverage. Leverage is essentially the use of borrowed capital to increase the potential return on investment. In this article, we will discuss in-depth what leverage is and how it works on Forex.com.

What is leverage?

Leverage, in forex trading, refers to the ability to control a large amount of money in the forex market through a smaller amount of invested capital. A trader who uses leverage can open larger positions than they would be able to with their own capital. Leverage allows traders to increase their potential profits and losses on a trade.

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For example, if a trader has $1000 in their account and uses a leverage ratio of 1:100, they can control a position size of $100,000. This means that if the trade is profitable, the trader will make a profit on the full $100,000 position, not just the $1000 they have invested. However, if the trade is unsuccessful, the trader could potentially lose the entire $1000.

How does leverage work on Forex.com?

Forex.com offers different leverage ratios depending on the trader’s account type and the currency pair being traded. The maximum leverage ratio available on Forex.com is 1:500.

For example, if a trader has a standard account with Forex.com and wants to trade the EUR/USD currency pair, the leverage ratio available is 1:30. This means that for every $1 of the trader’s capital, they can control a position size of $30 in the EUR/USD market. If the trader has $1000 in their account, they can control a position size of up to $30,000 in the EUR/USD market.

If the trader wants to trade a more volatile currency pair like the GBP/JPY, the leverage ratio available is 1:20. This means that for every $1 of the trader’s capital, they can control a position size of $20 in the GBP/JPY market. If the trader has $1000 in their account, they can control a position size of up to $20,000 in the GBP/JPY market.

It is important to note that while leverage can increase potential profits, it also increases potential losses. Traders should be aware of the risks involved in using leverage and should only use it if they fully understand how it works.

Margin requirements

When a trader uses leverage, they are required to maintain a certain level of margin in their account. Margin is the amount of money that the trader needs to keep in their account to keep their positions open. The margin requirements on Forex.com vary depending on the currency pair being traded and the leverage ratio being used.

For example, if a trader has a standard account with Forex.com and wants to trade the EUR/USD currency pair with a leverage ratio of 1:30, the margin requirement is 3.33%. This means that the trader needs to keep at least $33.30 in their account to keep their $1000 position open.

If the trader wants to trade the GBP/JPY currency pair with a leverage ratio of 1:20, the margin requirement is 5%. This means that the trader needs to keep at least $50 in their account to keep their $1000 position open.

Conclusion

Leverage is a powerful tool that can increase potential profits in forex trading. However, it is important to use it wisely and understand the risks involved. Forex.com offers different leverage ratios and margin requirements depending on the trader’s account type and the currency pair being traded. Traders should carefully consider their trading strategy and risk tolerance before using leverage in their trades.

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