If a trader had limited money to work with, stagnation would be reached swiftly. He/she wouldn't be able to make significant profits with limited Forex trading capital! In addition to this, several traders would go bankrupt trying to win risky trades with money they can't afford to risk. This is where leverage steps in. With this money borrowed from your broker, you will be able to hold positions of huge value, without having to shell too much of your trading capital. The profit potential unlocked by leveraging is unparalleled!
You can make huge wins without spending even half of your capital, but you can lose big too - which is what makes leveraging a risky ordeal.
Using Leverage The Right Way
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| Principles of Leverage in Forex Trading |
Other than intensive research and risk management, not much goes into leveraging. The first step is to sign up with a Forex broker who provides a good trading account. The Forex trading leverage provided varies from one broker to the other; some provide 20:1 while some give 500:1. Similarly, the leverage depends on the investment size, its position and the asset value. To trade with leverage, a minimum capital requirement of 2% has to be met; this is called the margin amount.
If you want to trade $50,000 on a leverage of 50:1, you are required to have at least $1000 in your trading account. Another important thing to note is that, while Forex trading in Malaysia, a trader should always have money in their trading account. Should certain capital levels drop, you won't be allowed to trade. Only with leverage can a trader expect to see profits of significant value. While a normal trade might allow you to make small winnings, the big profits only come with big risks and big leverage.
Why Do Traders Fear To Leverage?
Several thousands of traders harbor a belief that leveraging is bad. There's a fine line of difference between bad and risky; leverage is risky, but in no way is it disadvantageous. In the hands of an adept trader, leverage will help him/her reel massive profits. Most Forex traders who fear leverage have either carelessly lost a lot of money or are blindly following others. Leverage allows traders to risk money that isn't theirs, thereby making Forex trading all the more liquid and viable.
Leverage can be good or bad, depending on how you wield it. It's a double-edged sword after all! With the right broker to guide you, you'll master Forex trading in Malaysia and make your way to big profits in no time. Sign up with WesternFX today and avail our world-class Forex trading strategies. Our experts will teach you how to leverage right, and ensure you make it to the top echelon.
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