Leverage is defined as the tool which allows a trader to control a position of a higher value with less capital. Investing in currency exchange by paying the full market price (also called a 1:1 leverage) requires a significant amount of capital. In an effort to open the gates of forex trading to investors holding smaller amounts of capital, leverage was introduced.
How does Leverage work?
When trading with a 1:500 leverage, you need 500 times less money to open a trade, compared to an investor paying the full market price. With the introduction of leverage, many investors became more adventurous and traded larger volumes, which resulted in larger losses or larger profits. Therefore, in order to use leverage to your advantage, it’s very important that you understand how it works first.
In short: Leverage allows you to multiply your trading power with the investment of a smaller amount of capital.
What is Leverage Ratio?
Leverage Ratio is a measurement of your trade’s total exposure in comparison to its required margin. For example, to open a $100,000 position with a 1:1 leverage, you need a margin of $100,000. Whereas, by using a 1:500 (or 1%) leverage, you need a margin of $100,000 / 500 = $200.
Trading Note: Instantly calculate how much money you need to open a trade with Traders Trust’s Margin Calculator.
Leverage at Traders Trust
We offer Dynamic Leverage reaching as high as 1:3000 on specific currency pairs. With this tool, your leverage changes based on the total volume of your open trades. As maximum leverage starts from 1:3000, the required margin – the amount you need to open a trade – is significantly reduced.
In addition, to ensure sensible risk management, the leverage is automatically reduced as the volume of your open trades increases. Read more about Dynamic Leverage and try our Dynamic Leverage Calculator here.
At the same time, currency pairs, indices, metals, oils, and cryptocurrencies can be traded with leverage reaching up to 1:500. To view the maximum leverage for each instrument, simply visit our Trading menu section and select your preferred instrument.
Trade with Premium Advantages
Open your trades with Traders Trust and benefit from competitive low spreads and the ability to trade using Dynamic Leverage on the award-winning MT4 platform.