What Is Leverage?

What is Leverage?

is a tool that allows you to trade Forex in an amount greater than your investment amount.

Each broker will have different leverage. Some brokers will choose the size of the leverage and how much leverage is needed. What is leverage? How should I choose Leverage? How is leverage calculated?

Previously, 1Lot cost $ 100,000 US dollars, or about 3,300,000 baht.

You will need to have around three million baht to be able to open 1 lot order in the absence of leverage.

But if you choose Leverage 1: 100, you only have $ 1,000 investment, you can open 1lot orders, but if you choose Leverage 1: 1,000 will use only $ 100 investment, you can open orders. 1lot possible


Things you should know about Leverage are

Although Leverage helps us trade more than the deposit amount but cannot lose more than the amount that is in the balance of the pot

Therefore, the amount of Leverage helps to trade more, open more LOT, but when the Leverage is greater, even the more profitable opportunities but also has the opportunity to wash the pot more easily as well

If the leverage is 100, when buying a stock for 100 USD with a full amount of 100,000 USD, it will get up to 1,000 units but trade in the wrong way. Only 1 USD will immediately clear the pot. If Leverage is 500 to 1, it means that if buying a full 5,000 Unit with the wrong price of just 0.2 USD will immediately clear the pot.

From the example, you can see how much higher leverage is. The more able to make purchasing power even more. But if you buy a lot, when you make a profit, you get a lot of profit. But if there is a loss, it will lose a lot and may cause your investment to be 0 faster as well

When considering the risks Therefore, it can be seen that high leverage is not a high or good profit because investors want to keep the principal as long as possible. And continuously make profits More than today’s profit and then the next few days lost capital

Therefore, Money Management is more important and necessary for traders who want to make profits in the Forex market.