Best Ratio Leverage For Beginners

Leverage in Forex is the amount of trading funds that the broker is willing to lend to the trader's investment based on the ratio of the trader's capital to the amount of credited funds. The total amount of leverage provided by the broker is not constant. The broker sets the trader's rates, which in some cases can be as high as 1:100 or even more. Forex leverage is mostly expressed as a ratio. 

Good Rasio For Beginner 

Many beginners are attracted to leverage-based earning strategies because traders want to make more money in less time.

However, keep in mind that leverage is associated with certain risks. Traders at least need to understand concepts that are directly related to money management in leveraged trading, such as:

• Your account balance and Equity;

• Margins;

• Free Margins;

• Account Level;

• Margin Call and Stop Out.

Benefits of Using Leverage

1. Very High Profit-Generating Opportunity

Using leverage on Forex gives traders the opportunity to increase the trader's initial investment to play big.

The best example of leverage ratio :

For example, a trader who has only 1 thousand dollars in his account can actually trade on the Forex market with 50 thousand dollars with 1:50 leverage or 100 thousand dollars using 1: 100 leverage. Simply put, this trader risks losing his own 1,000 dollars, but if successful, will make a profit of $100,000 if the position is opened with 100% margin and 1:100 leverage.

2. Improve Capital Efficiency

For example, if the trader's account balance is $1000 and the trader uses 1:100 leverage, the trader actually has 100,000 USD to manage. This means traders have the opportunity to open more trades across a wide range of trading instruments and apply hedging techniques for additional protection against risk. This allows the trader to diversify the trader's portfolio, reduce risk and increase the chances of making a profit.

3. Low Initial Level

Let's look at this advantage using the previous example - the trader has 1,000 dollars in the trader's account. Let's say the trader is not using leverage, i.e. the trader is trading 1:1. In this condition, at best, the trader will be able to open one position with a minimum lot of 0.01, and not even on the EURUSD pair. This is because on Forex one lot is usually 100,000 units of currency. In other words, to open a minimum position in one of the most traded pairs on the Forex market - EURUSD - a trader needs 100,000 * 0.01 * 1.17470 = 1.174.70 USD. With 1,000 dollars in the trader's account and no leverage, the trader will not have the opportunity to open such a small position. However, thanks to the large leverage, even people with small deposits of 50-100 dollars have the opportunity to access the art of trading and trading on a par with professionals.

4. Favorable Financial Condition

Previously, when brokers did not provide leverage, the only opportunity to trade with leverage was to borrow very limited amounts of funds from banks with high interest rates, large collateral and guarantees. In the face of serious competition, Forex brokers provide great leverage to attract clients with very small deposit amounts and with minimal commissions. If the trader is trading intraday, using leverage is almost free. If you decide to trade overnight, consider SWAP - that's the broker's overnight commission.

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