Leverage

Ok, let’s discuss this very important topic in a brief and relevant way. Leverage will give you the capability to increase your Position Exposure. This means you will be able to make more, or God forbid, loose more. So it is essential to start with a low leveraged account, and evolve into a larger one, over time.

Now I want to give you an example on how much money can be made with a 1:100 Leverage Account, in contrast to a 1:500 Leveraged Account. Bear in mind that when you Sign Up you will choose the below:

leverage large dropdown

As soon as your Account is processed and approved we will change your Account’s Leverage to 1:100, 1:200, 1:300, 1:400 or 1:500, as per your request. So if you don’t have an Account yet, go ahead and create one now, and I’ll sort you out with your desired Leverage later.

Now, back to our example. Let’s assume that both Peter and Paul have each deposited $10,000, and have selected a 1:100 and 1:500 Leverage, respectively. They both identified the same opportunity, which is to go Long on EURUSD at the time marked on our graph where the rate is 1.38608. They both kept that position open, up until it reached 1.39486 a day later, where they both closed the position and made an 87 Pip Profit.

leverage eurusd 87 pip

Peter 1:100, $10,000
$10,000 x 100 = $1,000,000 of Buying or Selling Power.
$1,000,000 is roughly €717,000 at the time.
€717,000 x 0.0001 = $71.70 Position Exposure (per Pip)
$71.70 x 87 Pips = $6,237.90

Paul 1:500, $10,000
$10,000 x 500 = $5,000,000 of Buying or Selling Power.
$5,000,000 is roughly €3,585,000 at the time.
€3,585,000 x 0.0001 = $358.50 Position Exposure (per Pip)
$358.50 x 87 Pips = $31,189.50

So, we can see a staggering 5 fold Profit coming at $30,000 for the Daring and hopefully experienced 1:500 Leveraged Account of Paul, whereas Peter only made a modest profit of $6,000 and some change. Now we should consider the alternative scenario where both Peter and Paul opened their Long EURUSD trades but due to life’s distractions – didn’t notice their winnings and the rate eventually fell to 1.38450, from the original price they bought at 1.38608, loosing them both 16 Pips as they got disappointed and decided to close the trade.

leverage 16 pip loss

Let’s have a look at what the numbers are for both Peter and Paul.

Peter 1:100, $10,000
$10,000 x 100 = $1,000,000 of Buying or Selling Power.
$1,000,000 is roughly €717,000 at the time.
€717,000 x 0.0001 = $71.70 Position Exposure (per Pip)
$71.70 x -16 Pips = $-1,147.20

Paul 1:500, $10,000
$10,000 x 500 = $5,000,000 of Buying or Selling Power.
$5,000,000 is roughly €3,585,000 at the time.
€3,585,000 x 0.0001 = $358.50 Position Exposure (per Pip)
$358.50 x -16 Pips = $-5,736

So now we can see the loss-protected Advantage of Peter, where the loss was minimized at $1,000. Leverage should be used according to your experience. If you are just getting started, we should get you started at 1:100, if you are experienced we can consider the 1:200 to 1:500 range accordingly. Once you’ve opened your Account, we will arrange to discuss which Leverage is right for you.