Forex leverage means Borrowing money from your broker for you to trade.
This is not exactly taking a loan from your broker. Broker takes back the amount he gave you (for you to open a trade) when you close the trade.
Example:
If you have 1000$, this is enough to place a trade.
You will get 0.1$ per pip and you can have a maximum stop loss of 10,000 pips.
Still you can earn 0.1$ per pip trading 100$ having a 10X leverage.
Only disadvantage of this is, now your Maximum Stop Loss is only 1000 pips.
How this works...
Your Broker gives you 900$ when you open the trade (100$ 10X leverage trade). So now you have 1000$ so you can earn 0.1$ per pip. When you reach -1000pips (against you/ a loss). it means Your 100$ is over. So the trade is closed. Broker gets back his 900$ + Spread$.
How to use the leverage effectively...
When you analyse the market (technically), by indicators and ressistance & support...a good trader can tell how many pips should be his stop loss.
If its only 25pips - Trade on 400X leverage
If its 25-50pips - trade 200X
if its 50-100pips -trade 100X
etc...
If you are a day trader 100pips Stop loss should be enough for you.
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This is not exactly taking a loan from your broker. Broker takes back the amount he gave you (for you to open a trade) when you close the trade.
Example:
If you have 1000$, this is enough to place a trade.
You will get 0.1$ per pip and you can have a maximum stop loss of 10,000 pips.
Still you can earn 0.1$ per pip trading 100$ having a 10X leverage.
Only disadvantage of this is, now your Maximum Stop Loss is only 1000 pips.
How this works...
Your Broker gives you 900$ when you open the trade (100$ 10X leverage trade). So now you have 1000$ so you can earn 0.1$ per pip. When you reach -1000pips (against you/ a loss). it means Your 100$ is over. So the trade is closed. Broker gets back his 900$ + Spread$.
How to use the leverage effectively...
When you analyse the market (technically), by indicators and ressistance & support...a good trader can tell how many pips should be his stop loss.
If its only 25pips - Trade on 400X leverage
If its 25-50pips - trade 200X
if its 50-100pips -trade 100X
etc...
If you are a day trader 100pips Stop loss should be enough for you.
--------------------------------------------------------------------------------------
This Thread Is Sponsored By
Figher Pilot Reaction (New SL Android Game)
Visit that thread too...
---------------------------------------------------------------------------------------
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