Greetings, friends! Today's post will be useful for beginners. What is leverage? What benefits can be obtained with it? Whether the risk is increased when it is used?
Leverage - is borrowed money that identifies the broker to trade. The shoulder may be different, for example, 1: 4 or 1: 100. What is a leverage of 1: 100? The fact that the broker you virtually allocates funds to 100 times greater than yours. That is, you can open the transaction increased to 100 times the volume.
What leverage brokers?
If you take the majority of dealing centers, the small deposits of leverage is very large, for example, 1: 100, 1: 500, seen even 1: 5000! With an increase in the deposit, the shoulder is reduced. For a lot of money is not found 1: 100, generally does not exceed 1:20 lever. (One of the reasons why it is easier to manage small money)
For example, the largest and most developed in the Russian forex broker Alpari provides leverage up to 1: 1000. With the score at just $ 10, you can open the deal a maximum volume of 10 000 $.
How's the shoulder affect the results?
Let's look at an example 4, with and without a shoulder. I would buy the stock at all true for the Forex market and futures.
Example 1: No leverage. You have opened a brokerage account, joined 1,000 $ (what should be a deposit for beginners and what you can expect with your money). We decided to buy shares of "X", the price of which is $ 100. It is easy to calculate that for all the money you can buy 10 shares. 10 (shares) * 100 ($ price per share) = $ 1000 (the value of your account). More than 10 stocks to buy can not, because they do not have enough money. What to do if you believe in the transaction, that it will bring profit? How to earn more?
Leverage in Forex
Example 2: Leverage. You have to run all the same $ 1000. But there is a lever of 1: 100. So, you can automatically open a trade volume of 100 lots of times. In the first example, you could only buy 10 shares, you can buy now to 100 times more, ie 1,000 shares! Accordingly, it will be able to earn 100 times as much.
It is important to understand that the high leverage not only increases profits by using it, you can quickly lose all the money.
Example 3. Without leverage. Suppose that you bought 10 shares at $ 100 apiece. If the price drops to $ 99 per share, you will lose $ 1 for each share, for a total of $ 10. Score reduced from $ 1,000 to $ 990.
Example 4: Leverage 1: 100. You could buy 1,000 shares at the price of $ 100 apiece. The price drops to $ 99, you will also lose $ 1 for each share. But since you have 1,000 shares, not 10 (as in the previous example), you will lose your entire account, $ 1,000. Let's count: 1 $ (loss on each share) * 1000 (number of shares purchased) = $ 1,000. So when you use leverage, changing the price by only $ 1, you can lose your entire deposit.
How to avoid it?
How to control the leverage effect on the level of risk?
In Example 4 we lost entire deposit when the price change by only $ 1. This is a very big risk, because trading is just silly! How to reduce risk? How not to lose all the money? There are 2 ways to cool, and very simple.
1 way. Do not open the maximum amount of the transaction, that is not trade for all the money. Even if you have a lot of leverage, it does not mean that it should be used at 100%. We must use it wisely. The main thing - to develop the vehicle and follow it without question, I am sure that no profitable trading strategy does not involve trading in all that is.
Credit forex shoulder
2 method. Expose stop loss. Let's once again go back to the example 4, when the price reached a level of $ 99 per share, we lost $ 1000, that is, the entire deposit. For example, if the stop loss stood at $ 99.50, the deal would be closed at that price, and we would have lost only $ 500. And the other $ 500 would have been left for further trade. Thus, setting a stop loss at a certain level can advance to save money and reduce risk. In more detail the protection against losses in the article analyzed the topic, using the principles described can be guaranteed to protect themselves from capital losses or to limit them to a predetermined level.
Generally there is an indispensable thing for beginners is a glossary that explains all the basic concepts. What is the leverage that is spread and swap what is arbitration, which is the margin, etc. I advise you to study and always have on hand to quickly see when you need to. And what is required - no doubt. Get a glossary of terms can automatically enter the e-mail in the form below, for a minute, he will come to your address.
Your e-mail address
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Leverage and deposit (margin).
To open and maintain a position in the trading account is reserved deposit (also called margin) - funds that are temporarily blocked, they serve as a kind of insurance in case of loss-making transaction (some of them are so afraid).
The amount of collateral depends on the leverage, the greater the leverage, the less collateral is required to open the transaction. Let's look at an example with 3 different leverage and monitor the change in the margin.
Example 1. Our deposit $ 1,000. Leverage 1: 500. Suppose we enthusiastically believe in the growth of the euro against the US dollar, so we decided to buy 0.01 lots EUR / USD at 1.3411 (standard lot is equal to 100 000 base currency, and 0.01 of the lot - 1000). That is, we want to buy 1000 Euro against the dollar. As in this case, to calculate the collateral? It's simple: one euro is 1.3411 dollar, so 1000 euros worth 1341.1 dollar. If we traded without leverage, for the purchase of 1000 euros, we would need 1341.1 dollar. But the leverage of 1: 500, this amount is reduced to five hundred times: 1341.1 / 500 = 2.68. This is our pledge to open positions in the account will be frozen $ 2.68.
shoulder forex
Example 2: A deposit of $ 1000. Leverage 1: 100. Despite everything, we continue to enthusiastically believe in the growth of the euro against the US dollar. Under such conditions, to buy 1000 Euro against the US dollar price of 1.3411, we will need to bail = 1341.1 / 100 = $ 13.41.
Example 3: A deposit of $ 1000. Leverage 1: 1. To buy 1000 euros, we need 1341.1 dollar. As if we did not believe enthusiastically in the euro against the US dollar, but in this case we will not allow the deposit to open a position of such volume.
What leverage brokers?
If you take the majority of dealing centers, the small deposits of leverage is very large, for example, 1: 100, 1: 500, seen even 1: 5000! With an increase in the deposit, the shoulder is reduced. For a lot of money is not found 1: 100, generally does not exceed 1:20 lever. (One of the reasons why it is easier to manage small money)
For example, the largest and most developed in the Russian forex broker Alpari provides leverage up to 1: 1000. With the score at just $ 10, you can open the deal a maximum volume of 10 000 $.
How's the shoulder affect the results?
Let's look at an example 4, with and without a shoulder. I would buy the stock at all true for the Forex market and futures.
Example 1: No leverage. You have opened a brokerage account, joined 1,000 $ (what should be a deposit for beginners and what you can expect with your money). We decided to buy shares of "X", the price of which is $ 100. It is easy to calculate that for all the money you can buy 10 shares. 10 (shares) * 100 ($ price per share) = $ 1000 (the value of your account). More than 10 stocks to buy can not, because they do not have enough money. What to do if you believe in the transaction, that it will bring profit? How to earn more?
Leverage in Forex
Example 2: Leverage. You have to run all the same $ 1000. But there is a lever of 1: 100. So, you can automatically open a trade volume of 100 lots of times. In the first example, you could only buy 10 shares, you can buy now to 100 times more, ie 1,000 shares! Accordingly, it will be able to earn 100 times as much.
It is important to understand that the high leverage not only increases profits by using it, you can quickly lose all the money.
Example 3. Without leverage. Suppose that you bought 10 shares at $ 100 apiece. If the price drops to $ 99 per share, you will lose $ 1 for each share, for a total of $ 10. Score reduced from $ 1,000 to $ 990.
Example 4: Leverage 1: 100. You could buy 1,000 shares at the price of $ 100 apiece. The price drops to $ 99, you will also lose $ 1 for each share. But since you have 1,000 shares, not 10 (as in the previous example), you will lose your entire account, $ 1,000. Let's count: 1 $ (loss on each share) * 1000 (number of shares purchased) = $ 1,000. So when you use leverage, changing the price by only $ 1, you can lose your entire deposit.
How to avoid it?
How to control the leverage effect on the level of risk?
In Example 4 we lost entire deposit when the price change by only $ 1. This is a very big risk, because trading is just silly! How to reduce risk? How not to lose all the money? There are 2 ways to cool, and very simple.
1 way. Do not open the maximum amount of the transaction, that is not trade for all the money. Even if you have a lot of leverage, it does not mean that it should be used at 100%. We must use it wisely. The main thing - to develop the vehicle and follow it without question, I am sure that no profitable trading strategy does not involve trading in all that is.
Credit forex shoulder
2 method. Expose stop loss. Let's once again go back to the example 4, when the price reached a level of $ 99 per share, we lost $ 1000, that is, the entire deposit. For example, if the stop loss stood at $ 99.50, the deal would be closed at that price, and we would have lost only $ 500. And the other $ 500 would have been left for further trade. Thus, setting a stop loss at a certain level can advance to save money and reduce risk. In more detail the protection against losses in the article analyzed the topic, using the principles described can be guaranteed to protect themselves from capital losses or to limit them to a predetermined level.
Generally there is an indispensable thing for beginners is a glossary that explains all the basic concepts. What is the leverage that is spread and swap what is arbitration, which is the margin, etc. I advise you to study and always have on hand to quickly see when you need to. And what is required - no doubt. Get a glossary of terms can automatically enter the e-mail in the form below, for a minute, he will come to your address.
Your e-mail address
GET
Leverage and deposit (margin).
To open and maintain a position in the trading account is reserved deposit (also called margin) - funds that are temporarily blocked, they serve as a kind of insurance in case of loss-making transaction (some of them are so afraid).
The amount of collateral depends on the leverage, the greater the leverage, the less collateral is required to open the transaction. Let's look at an example with 3 different leverage and monitor the change in the margin.
Example 1. Our deposit $ 1,000. Leverage 1: 500. Suppose we enthusiastically believe in the growth of the euro against the US dollar, so we decided to buy 0.01 lots EUR / USD at 1.3411 (standard lot is equal to 100 000 base currency, and 0.01 of the lot - 1000). That is, we want to buy 1000 Euro against the dollar. As in this case, to calculate the collateral? It's simple: one euro is 1.3411 dollar, so 1000 euros worth 1341.1 dollar. If we traded without leverage, for the purchase of 1000 euros, we would need 1341.1 dollar. But the leverage of 1: 500, this amount is reduced to five hundred times: 1341.1 / 500 = 2.68. This is our pledge to open positions in the account will be frozen $ 2.68.
shoulder forex
Example 2: A deposit of $ 1000. Leverage 1: 100. Despite everything, we continue to enthusiastically believe in the growth of the euro against the US dollar. Under such conditions, to buy 1000 Euro against the US dollar price of 1.3411, we will need to bail = 1341.1 / 100 = $ 13.41.
Example 3: A deposit of $ 1000. Leverage 1: 1. To buy 1000 euros, we need 1341.1 dollar. As if we did not believe enthusiastically in the euro against the US dollar, but in this case we will not allow the deposit to open a position of such volume.
