TraderstFX offers a flexible leverage philosophy where clients can choose to trade using 1:100 through to 1:1000 leverage. The use of leverage should be carefully considered as it can be both beneficial and also risky for clients. The correct use of leverage can help clients maximize the profitability of successful trading positions but if misused, higher leverage can result in stop-outs on unsuccessful positions or if a trade goes against you.
Leverage & Margin
In the forex markets, leverage can be used to reduce the collateral needed to enter the market that is referred to as margin in the MT4 trading platform. TraderstFX offers flexible leverage to allow clients to choose the level of risk. Should you choose leverage of 1:400, this means that with a $1,000 balance you can purchase $400,000 of a chosen currency. As the market moves for or against your order, the account equity either grows or reduces at the same rate according to the leverage level. Traders must remember that in forex, leverage is a double-edged sword. While it can multiply your profits, it can equally increase your potential losses. TraderstFX highly recommends that all traders use a lower level of leverage, or at least to understand the full risk of misusing leverage.
Leverage Ratio & Minimum Margin Requirements
Leverage is always used as a ratio and is always reliant on the margin requirements set. At TraderstFX, margin is calculated as follows: Position Size/Leverage * Currency Pair Current Exchange Rate.
As a trader, it’s important to understand both risks and benefits of trading forex using leverage. By using leverage of 1:100, the client can enter the market with 100 dollars for every dollar in the account. With a balance of $1,000 in the account, you can trade up to $100,000. Your trade has the earning potential of a $100,000 order, but, you also face the risk of losing the equivalent of a $100,000 trade if the position goes against you. Leverage is the most common cause of significant trading losses.
Margin Calls & Stop Outs
When trading using leverage, you are loaning funds from your broker to be able to trade at higher levels. The funds deposited to your account are used as collateral on which the loan is based. This is why margin calls and stop outs are implemented, to avoid the risk of your account going into a negative balance.
Margin call is the first warning to notify traders that the margin of the account is reaching the minimum level. A stop out occurs when the account has too little equity to continue the trade and is used as a tool to protect accounts from going into negative equity.
What Leverage does TraderstFX Offer?
|500 - 1,000||Up to 1:1000|
|1,001 - 10,000||Up to 1:500|
|10,001 - 50,000||Up to 1:100|
|50,001 - Ultimate||Up to 1:100|
We highly recommend that the leverage choice should be set to a maximum of 1:200, this level still allows significant increase of account margin but also protects you against losing positions. Generally when FX/CFDs with a dealing desk, the broker encourages the use of higher leverage as they know that statistically when trading with higher leverage, most positions end up being stopped out due to lack of account equity to ride a negative position.