The reason why financial investment has high returns is because of the leverage effect, so that investors can get larger returns by teaching small investments. The principle of leverage also exists in the foreign exchange market. This article will introduce you to what is meant by foreign exchange leverage and how investors can use foreign exchange leverage.
What does foreign exchange leverage mean?
Leverage in foreign exchange is equivalent to a tool that enables contracts at the same price to reduce the amount of money invested by a certain percentage. In foreign exchange trading, what we call leveraged foreign exchange trading is essentially foreign exchange margin trading.
As an investor in foreign exchange trading, the leverage ratio we can choose is generally between 20 times and 400 times, while the standard contract in the foreign exchange market is 100,000 US dollars per lot (the underlying currency is generally the previous currency against the currency pair). If the leverage ratio you choose is 20 times, then a margin of US$5,000 is required for one hand; if the leverage ratio is 100 times, then a margin of US$1,000 is required for one hand.
For example, if investors are in the foreign exchange market and their margin is US$1,000, they can have the opportunity to use funds higher than US$1,000 to conduct foreign exchange transactions, and they may have the opportunity to use US$10,000 or even 100,000 US dollars to conduct foreign exchange transactions. Foreign exchange transactions, and if investors use foreign exchange leveraged transactions for foreign exchange transactions, if they succeed in the transaction, their trading income will also double. If investors do not use leverage in foreign exchange transactions, they The trading income may be lower, and if investors use foreign exchange leverage in foreign exchange transactions, their income will also be higher.
When investors do not use foreign exchange leverage, their trading income may be $30.
If investors use a leverage of 100:1 in the same transaction, their trading income will become $3,000.
How do investors use foreign exchange leverage?
- Choose the best broker to open an account
If investors want to conduct foreign exchange leveraged trading, they should choose the best broker, which can give investors more advantages in trading, and the best broker can provide investors with the most secure leveraged trading account , Investors invest their funds into such margin trading accounts, investors do not need to worry about the safety of trading funds, such trading brokers can protect investors’ funds from being misappropriated and swallowed, and investors can use the most Good trading account for foreign exchange transactions, so you can have more opportunities for foreign exchange leveraged transactions.
- Reasonable use of leverage
If investors want to successfully use foreign exchange leveraged trading to obtain income, the first important thing they should know is to use the most advantageous leverage limit. Before understanding such content, investors should understand the role of leverage. There are many Newbie investors would think: Since leverage allows investors to trade with small strokes, investors can use very low trading capital to obtain a lot of trading income. Therefore, the higher the trading leverage used by investors, the better. In fact, this is not the case. Investors have a one-sided understanding. Investors should use a reasonable amount of leverage, so that they have the opportunity to obtain trading income from the foreign exchange market. Investors need to know that in the foreign exchange market, foreign exchange leveraged trading is not only possible Give investors the opportunity to obtain more trading income, but also allow investors to lose in the transaction.
Regarding the issue of foreign exchange leverage, this article introduces what is meant by foreign exchange leverage and how investors can use foreign exchange leverage. In short, foreign exchange leverage is a double-edged sword. Therefore, investors need to take advantage of their advantages and avoid their disadvantages. They should use the most advantageous leverage line for foreign exchange transactions in transactions.