What is the meaning of "Leverage" in Forex Trading?

You should have in mind that there is a relationship between leverage and its impact on your trading account. The bigger the amount of effective leverage that is used, the greater are the swings - up and down - in your account equity. The smaller the amount of leverage that is used, the smaller are the swings - up or down - in your account equity.


Just because a trader can use a higher amount of leverage in his trading account does not necessarily mean that he wants to use all or any portion of it. You should think about it like an automobile or motorcycle: Just because a motor could run at speeds of 160 miles per hour it does not mean that YOU necessarily need to drive it that fast. You can see that the faster you drive it, the more likely you can get into an accident. So you are in bad risk of bodily injury if driving at higher speeds and leverage is similar to that analogy. So please always have in mind that more leverage puts your trading account at risk.


Please have a look at our margin calculator which can calculate the amount of funds that are needed in order to hold open positions based on your trading account’s margin ratio: Margin Calculator