Leverage Forex Trading – For Elite Day Traders Only
Posted in Forex Basics on 11. Mar, 2011
Get A Forex Robot That Is Capable Of Doubling Your Money Every Single Month…
Leverage forex day trading is a high rate of return investment for those day traders willing to master the management of margin and leverage. Margin trading is not for the weak kneed day trader though – as the weapon of leverage is a double edged sword.
Making a Mountain of Money Out of a Mole HillTraders who leverage forex make the most amount of money with the least amount of capital. Currency speculators get the benefit of very high liquidity combined with very low margin requirements when they leverage forex transactions. Some accounts require a margin as little as 0.5% of the borrowed amount, a staggering 200:1 ratio. For those not familiar with this concept, this means that an investor with ten thousand dollars in his account could purchase two million dollars worth of foreign currency.
Leverage Ratio Can Go As High As 400:1 – an Example without LeverageWhile that is an extreme example of the purchasing power of a trader who opts to leverage forex, it is not abnormal to see traders operating at ratios in the neighborhood of 10:1. Imagine a couple of scenarios where this trading tactic is being employed in the foreign currency market – for example a dollar/yen trade. What would be the return on investment if a trader bought ten thousand dollars worth of Yen at 100 Yen per Dollar and the dollar forex rate weakened to 95 Yen/Dollar?
In this case the trader would take his $10,000 and initially buy 1,000,000 Yen. Later, the speculator sells his Yen to buy dollars and gets $10526 dollars in return (1,000,000/95), a 5.26% gain on the trade.
Example Leverage Trade 2: Leverage Forex Trade with 10:1 RatioWhat would have happened had the trade been a leverage forex trade with the purchasing power amplified to 10:1?
In this case the trade would put up $10,000 and buy ten million Yen (borrowing $90,000 in the process). Of these one million are bought with capital, the other nine million are bought on margin. Providing all the other results were the same (exchange rate drops to 95 Yen/dollar) and the resulting out put transaction yields $105,260. The trader returns the $90000 borrowed, leaving $15,260 ($10000 initial capital plus $5260 profit). This equals a 52.6% gain – ten times what was made without the leverage forex trade.
EXPERIENCE… A LOT OF EXPERIENCE TRADING MANUALLY!
You have to learn about margin to leverage forex wisely and really amplify your day trading gains. Those who master leverage can make a lot of money quickly when they take advantage of the superior leverage forex trading affords.
The only other way to make as high a rate of return as quickly is to give binary options a try. Binaries are a short holding period (less than a day) high return investment asset capable of yielding 75% in just an hour. They are a day trader’s dream.
Steve B. Wise
Read More About Forex Trading and Forex Robots.
