Friends, relatives, or the internet may have previously told you about incredible forex success tales. Trading professionally is difficult, but it is an excellent method to make a lot of money.
Forex trading is one of the oldest forms of price speculation and trading. It was formerly only available to substantial investment banks and corporations, but it has become more widely available with the growth of internet trading platforms.
Starting a new forex trading profession is complex, and the first few months are likely to be the most difficult in your trading career. It will get easier if you have grown accustomed to the procedure and have improved your trading abilities.
If you have prior knowledge of forex you may already know about leverage. Leverage is a huge part of forex trading, and most traders will use the tool.
What Is Leverage?
Leverage is used to enhance your exposure to price fluctuations. Price fluctuations in forex may be relatively modest. Thus a price gain of a few pips on a £100 account will only make your pence.
Instead, with leverage, the size of the deal is determined by a deposit or margin. The margin is a small percentage of the total amount of money traded. The broker provides you with the additional funds.
For example, you may initiate a position with a £1000 margin, but the transaction value is £100,000 since it is leveraged. You’re trading at 100 times your margin; therefore, this is a 1:100 leverage.
Why Is It So Important To Forex?
You will most likely have a smaller account as a novice, which means you will have to leverage to generate substantial gains and expand your account.
You may also trade in both directions using leverage. You can short the market using leverage, implying that you believe the price will fall. This gives you additional alternatives in your trading approach and helps you to maximise profits.
Forex markets will also offer higher amounts of leverage rates than in other markets. Therefore, you can increase your profits by a larger amount when trading forex.
However, the possibility of increased profits is paired with increased losses. Leverage can maximise losses as well as profits, so you must manage your risk correctly.
Can You Trade Forex Without Leverage?
Forex trading without leverage is possible. However, it’s only feasible if you have a very large account. With accounts worth 5 or 6 figures, you don’t need to multiply your trade size as you will probably already have large positions.
However, this is not possible for most traders and especially beginners. When you’re just starting, it’s unlikely that you will have the capital to make significant positions, and this means you’ll only be looking at a return rate of around 0.5% per month.
So if you want to make appealing profits, you will probably have to use leverage. This is why most professional forex traders will use leverage and boost their accounts.