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Hello Everyone!
I'm grossly confused on what leverage means. Please help me out.
I'm putting an example:- Say, i'm having an account balance of $1133 and trading 100000 units as 1 lot and have a leverage of 100:1. So margin shall be $1000. So what does it basically mean? Does it mean that i can bear a loss till $1000 on that particular position or is that i can face a loss till $133 as the cushion towards my prospective loss before i get a margin call? Say for instance if i go short in GBP @ 2.0300 with a limit of 2.0100. What kind of Stop loss will subject me to margin call? What if i set stop loss at 2.0450? At what rate will i receive margin call and will eventually make Stop loss automatically triggered?
Further what shall be my position if i'm taking leverage of 200:1 instead of 100:1 with the same scenario above? After how many pips going against me from the level of my entry viz 2.0300 will subject me to a margin call? (or at what rate?)
Please help as i'm totally confused with the subject. Else if someone can provide me article links which happens to be exhaustive and makes my query clear.
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Hi Nishant... a 200:1 leverage its not serious on my opinion...
100:1 its ok... let me give you the EFX example as I consider them a nice broker as they have an ECN type platform...
1 contract moves 10.000 units of X currency on x pair... for the sake of simplicty lets say its a USD pair ej. USD/JPY... so in that case each contract will cost you $100 as your leverage is 100:1 wich is $100 x 100 leverage = 10.000 units...
In terms of margin calls it depends on the broker... some work with a 25% others if their is equity for you position... no problem...
should you have at least $200 on acct for each $100 you trade you should be ok... and manage yourself with technical stops... hope this makes some sense... cheers Walter.