On the leverage in forex margin trading
When you open an account in a foreign exchange company, the service staff will ask you the leverage ratio you are willing to accept. Many friends don't quite understand this concept. This article specifically explains the meaning of leverage.
In foreign exchange margin trading, leverage ratio is a very important concept, which is also the attraction of foreign exchange compared with stocks. You only need a small amount of money to trade through leverage. This makes your money more efficient.
Let's give an example to illustrate the concept of leverage. Take buying one hand of GDP / USD (1.6000 / 1.6003) as an example. In fact, holding 100000 GDP depends on selling 160300 USD, while the customer does not need to really sell 160300 USD. According to the magnification of 100 times, only 1600300 / 100 = 16000 USD needs to be mortgaged. Take buying one hand of USD / JPY (108.00 / 108.03) as an example. In fact, holding 100000 USD depends on selling 10.803 million JPY, while the customer does not need to really sell 10.803 million JPY (equivalent to 100000 USD). According to the 200 times magnification, only 100000 / 200 = 500 USD needs to be mortgaged.
Now you may understand the concept of leverage. The higher the leverage ratio is, the less margin is used to hold the same position; On the contrary, the lower the leverage ratio, the more margin occupied by holding the same position. The leverage ratio of 25 times, 50 times and 100 times can be selected for the general standard account, which is 100 times by default. The customer can submit a written application for modification. The maximum magnification of the mini account is 200 times.