Archive for the ‘Leverage options’ Category

Leverage options, are they really important?

There are many forex brokers available on the market, but before you decide to choose one, always look for wide range of leverage options. Leverage is essential in forex due to the fact that the price deviations (the sources of profit) are as small as fractions of a cent. Leverage, presented in form of a ratio between total capital available to actual capital, is the sum of money a broker will lend you for the purpose of trading.

For instance, a ratio of 100:1 indicates your broker would provide you with $100 for every $1 of actual capital. Often brokerages provide the ratio of as much as 250:1. Bear in mind that lower leverage indicates lower risk of a margin call, but also lower profit for your money (and the other way round).

To sum it up, those who have limited capital should make themselves sure whether their broker offers high leverage. If capital is not an issue, any broker with a wide range of leverage options should be fine. A wide range of options lets you alter the level of risk you are willing to take. For instance, less leverage (and as a result less risk) may be a good idea for very volatile currency pairs.

© 2008 Forexize.com blog