Margin And Leverage In Forex Trading Forextradingbrain

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Leverage Trading Terms – Otosection
Source: otosection.com

Leverage Trading Terms – Otosection.

What is Leverage in Forex | How does Leverage Work | Forex Leverage | IFCM
Source: www.ifcmarkets.com

What is Leverage in Forex | How does Leverage Work | Forex Leverage | IFCM.

Forex Leverage Explained, and How Much to Use - TradeThatSwing
Source: tradethatswing.com

Forex Leverage Explained, and How Much to Use - TradeThatSwing.


Understanding Pips Margin and Leverage in Forex Trading

Understanding Pips, Margin, and Leverage

In this video, I review and provide an understanding of pips, margin, and leverage. Always check with your broker to make sure you know the details of how they calculate pips, margin, and leverage.

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Forex Contracts are made up of “Lots”:
A standard lot = 100,000 units
A mini lot = 10,000 units
A micro lot = 1,000 units

Most retail forex traders are trading micro lots. Check with your broker.
A “lot” describes the currency pair.

For example:
If EUR/USD price is 1.2500 and you are buying one micro lot, you are purchasing €1000 Euros and selling $1,250 US Dollars. Margin is the amount of cash the broker sets aside to trade a certain number of lots of a forex pair. If a broker requires $20 margin for every contract of EUR/USD and you are trading ten contracts, $200 of margin is required.

Margin is subtracted from your equity and what’s left is what you can trade. Margin is money put aside to protect the broker from your losses.

If you have $10,000 in an account and your trade requires $2,000 in margin you can lose up to $8,000 on the trade you selected.

If your trade loses over $8,000, the broker will execute a “margin call” and close the trade. What was your leverage in that trade? The $2,000 of margin controlled 100 micro lots or $100,000 worth of contracts. Your leverage was 50:1.

How much is each PIP worth? What is a PIP? Pip stands for “Point in Percentage.” In a US Dollar denominated micro lot currency pair such as EUR/USD a Pip is equal to $0.10. One contract = $1,000 and 1/10 of 1% of that contract is $.10. In this example a Pip = $0.10

Using the earlier example, If you purchased 100 micro lot contracts of EUR/USD, each Pip would be worth $10. If the trade went 800 pips against your direction, a margin call would be executed by your broker, and you would have lost $8,000.

Your broker’s trading application should tell you the cost per Pip and margin required. Now you calculate your leverage and better understand the risk in your trade.

Educational information and much more are available on my YouTube Channel under the Playlist “Forex Resources”.

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The newsletter provides charts, signals, and analysis of our Forex Position Trading. These signals are provided for educational purposes only and aren’t financial advice.

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Forex Leverage Explained, and How Much to Use - TradeThatSwing

A Precise Answer to Leverage in Forex Trading - ox-currencies
Source: ox-currencies.com

A Precise Answer to Leverage in Forex Trading - ox-currencies.

What is Leverage in Forex and How Does it Work?
Source: www.fxstreet.com

What is Leverage in Forex and How Does it Work?.

A Precise Answer to Leverage in Forex Trading - ox-currencies
Source: ox-currencies.com

A Precise Answer to Leverage in Forex Trading - ox-currencies.

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