Leverage Your Capital
In Order to Multiply Your Profits
Excerpted from FxTradingStrategy.com
Many beginning traders dont fully understand the
concept of leverage. Basically, if you have a start up capital
of $5,000 and if you trade on a 1:50 margin you can effectively
control a capital of $250,000. However, a two percent move
against you and your capital is completely wiped out. If
you are a beginning trader you should not use more than
1:20 margin until you get comfortable and profitable and
then and only then you can attempt to use higher margins.
What does 1:20 margin mean? It means that with your $5,000
you will control a capital of $100,000. Lets say you
are trading EUR/USD and by using our entry strategy you
have decided to enter the trade on a long side. That means
that you are betting that USD will depreciate against Euro.
Lets say current EUR/USD rate is 1.305. Again, if
your trading capital is $5,000 and you are using 1:20 leverage
you will effectively be exchanging $100,000 to Euros. If
the current rate is 1.305 you will receive 100,000/1.305
= 76,628 Euros.
If the trade goes in your direction margin will work in
your favor and 1% decline in USD will mean 20% increase
in your start up capital. So if EUR/USD rate moves from
1.305 to 1.318 you will be able to exchange your 76, 628
Euros back to $101,000 for a profit of $1,000. Since your
start up capital was $5,000 it is effectively a 20% increase
in your account. However, if the trade went against you
and USD appreciated 1% vs. Euro your account would be reduced
Excerpted from FxTradingStrategy.com, creators of the
"Forex Trading Strategy", which covers all
aspects of currency (forex) trading and includes a proven
strategy that is explained with real life charts and examples.
Learn more by visiting FxTradingStrategy.com.