Many beginning traders do not fully understand the concept of leverage. This one forex trading strategy, leverage capital to multiply profits. Basically, if you have a start-up capital of $ 5000 trade and commerce in a 1:50 margin you can effectively control a capital of $ 250,000. However, a two percent move against you and your trading capital is completely wiped out. If you are a currency trader principle should not use more than 1:20 margin until you get comfortable and profitable and then and only then can try to use higher margins.
What margin of 1:20 mean? This means that with $ 5000 to control a capital of $ 100,000. Say you are trading the currency pair EUR / USD and by using our entry strategy you have decided to enter the trade on a long side. This means you are betting that the depreciation of U.S. dollars against the will of Euros.
Let's say current EUR / USD rate of 1.455. Again, if the trade is $ 5000 of capital, it is actually using 1:20 as the exchange of 100,000 U.S. dollars to Euros. If the current rate is 1.455 you will receive 100,000 / 1.455 = 68,728 Euros.
If the trade goes in the direction of his room to work in their favor and 1% in dollars means 20% increase in its start-up trading capital. Therefore, if EUR / USD rate moves from 1.455 to 1.469, you can exchange your 68,728 Euros back to $ 101,000 for a profit of $ 1,000. Since its launch commercial capital was $ 5,000, is actually a 20% increase in your account. However, if the trade goes against you and USD appreciated 1% vs. Euro your account would be reduced to $ 4000.
What margin of 1:20 mean? This means that with $ 5000 to control a capital of $ 100,000. Say you are trading the currency pair EUR / USD and by using our entry strategy you have decided to enter the trade on a long side. This means you are betting that the depreciation of U.S. dollars against the will of Euros.
Let's say current EUR / USD rate of 1.455. Again, if the trade is $ 5000 of capital, it is actually using 1:20 as the exchange of 100,000 U.S. dollars to Euros. If the current rate is 1.455 you will receive 100,000 / 1.455 = 68,728 Euros.
If the trade goes in the direction of his room to work in their favor and 1% in dollars means 20% increase in its start-up trading capital. Therefore, if EUR / USD rate moves from 1.455 to 1.469, you can exchange your 68,728 Euros back to $ 101,000 for a profit of $ 1,000. Since its launch commercial capital was $ 5,000, is actually a 20% increase in your account. However, if the trade goes against you and USD appreciated 1% vs. Euro your account would be reduced to $ 4000.
