Leverage and Margin

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When you talk about leverage, think about a loan. Who gives away this kind of loan? FOREX broker who takes care of the trader’s account provides the loan. Possible options of leverage are 50:1, 100:1 or 200:1 depending on a broker and the size of the position you are trading.

Standard lot size is USD $100,000 so for a trade of this size the leverage is usually 50:1 or 100:1.

For a trade smaller then $50,000 (mini lot size -USD $10,000) the leverage is usually 200:1.

Sounds a bit crazy, but that’s the way the cookie crumbles! That being said, lets see yet another example:

For your deposit of, let’s say, $1,000 you can trade 1 lot of $100,000. And with $7,000 you will trade up to $700,000. In this example the broker asks a 1% margin (minimum security) for each lot – for every $100,000 traded, the broker wants a deposit of $1,000. First, let’s look at the example of trading without margin.

SCENE 1: You have opened an account of $1,000 with 100:1 leverage. So basically you have the purchase power of $100,000. And you see that USD/JPY exchange rate at 109.3.

In case you decide to trade without margin, you only have $1,000 of buying power. With $1000 the maximum amount of Yen you can buy is 109,300 Yen. Not sure how we came up with this number? Here is the explanation:

USD/JPY exchange rate at 109.3

Base currency = USD. The base currency always has a value of 1. This means that for 1 USD you can buy 109.3 JPY. This also leads to the conclusion that for 1,000 USD you can buy 1,000 x 109.3 = 109,300 JPY.

SCENE 2: Later on you see that USD/JPY exchange rate at 109.0. It is time to see off your Japanese Yen and get some profit! How much dollars can you get for 109,300 JPY at the current exchange rate? Let’s calculate:

109,300 / 109.0 = USD 1002.75

CONCLUSION: So, initially you had USD $1,000 and now you have got USD $1002.75. Your profit is

1002.75 -1,000 = $2.75

Now let’s consider the same example but trading with margin

SCENE 1: With margin, your account of $1,000 has a power of $100,000. You buy Japanese Yen while USD/JPY exchange rate at 109.3. How much Yen did you get for $100,000?

100,000 x 109.3 = JPY 10,930,000

SCENE 2: Now USD/JPY exchange rate at 109.0 and you want to buy USD back. How much can you get?

10,930,000 / 109.0 =100,275

CONCLUSION: The profit you have made in this trade is 100,275 – 100,000 = USD $275.

The given examples are of course much simpler then the real marketing situation, but it illustrates the main trading idea in a comprehensive way.

Leverage can be represented as a ratio or in terms of margin percentage. In order to understand both representations, remember this:

Leverage = 100 divided by Margin Percent

Margin Percent = 100 divided by Leverage

We are already seen examples of leverage represented by a ratio – 50:1, 100:1, or 200:1.

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  1. Commented by: Philipbub

    Перевозка грузов – главный компонент современной логистики, обеспечивающий передвижение товаров от производителей к потребителям. Это трудный и ответственный процесс, на который влияют множество моментов, и его успешное осуществление требует профессионального подхода.

    Разнообразие Типов Транспорта:
    Перевозка грузов деют разнообразие разновидностей транспортировки зависимо от типа груза, расстояния и времени доставки. Авто перевозки обеспечивают гибкость и быструю доставку, жд перевозка грузов эффективны для крупногабаритных и глобальных грузов, а морские и авиаперевозки позволяют окутать дальние рынки.

    Профессиональные Грузовые Компании:
    Оптимальное заключение для удачных грузоперевозок – это сотрудничество с проф грузовыми компаниями. Эксперты в этой области предоставляют глубокий спектр предложений, начиная от планирования маршрутов и упаковки грузов, заканчивая отслеживанием и обеспечиванием безопасности в пути.

    Безопасность и Страхование:
    Безопасность грузов – приоритет для грузовых фирм. Современные технологии отслеживания и мониторинга обеспечивают неизменный контроль за движением грузов, а страхование грузов разрешает минимизировать риски вероятных потерь или повреждений.

    Эластичность и Адаптивность: http://dubai.myforum.ro/eficien-539-259-logistic-259-redefinit-amp-vt808.html
    Область перевозки грузов настятельно просит гибкости и адаптивности к изменениям в рыночных критериях и необходимостях посетителей. Профессиональные грузовые компании владеют ресурсами для действенной реакции на динамические конфигурации и обеспечивания клиентов нужной эластичностью в плане предложений и тарифов.

    Экологическая Устойчивость:
    Современные тренды в перевозках грузов уделяют внимание экологической стойкости. Почти все компании энергично внедряют действенные тс, альтернативные источники энергии и стратегии для понижения действия на окружающую среду.

    Эффективное Управление Логистикой:
    Грузоперевозки содержат в себе не столько физическое движение грузов, но и управление всем логистическим ходом. Действенная логистика – это синхронизация всех рубежей доставки, начиная от складского учета и заканчивая четкой доставкой на пункт предназначения.

    Заключение:
    Грузоперевозки – это обязательная доля прогрессивной торговли и экономики. Проф грузовые фирмы, обладая опытом и ресурсами, обеспечивают надежность и безопасность для ваших грузов, предоставляя глубокий спектр услуг от планирования до доставки.

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