What is Forex Trading Leverage?

Leveraged trading is a primary benefit of Forex trading. At Forexray, leverage is referred to as margin, this allows for you to gain major exposure in the Forex markets even when you are armed with a small initial deposit.

When the markets shift to favor your trade, the net returns you reap are a lot more than what your initial out lay was. Now if you bought the currency physically you would not be able to achieve this advantage.

That being said, leverage goes both ways. Your net returns could be a lot greater than the initial deposit, but so can any losses that you incur.

How Does Forex Leverage Work

Leverage simply means controlling big exposure against a small deposit that you choose. Forexray works out the leverage in ratio form. For instance 50 to 1 is the ratio that is equivalent of a margin of 2%. In this particular scenario a trader requires 2% of the total exposure in their account if they want to place the trade.

The margin that is needed for this position is the quantity of funds one must have in order to open a Forex position.

In another example you can see how Forex trade actually works a lot like how one invests in a mortgaged house. Traders pay a financing charge every night for the exposure of Forex trade which also includes the sum that has been borrowed in order to trade in full position.

It is important to note that the margin amount that is needed is affected by fluctuations in the market price. This allows for better management and trader awareness for their margin. What happens here is that your Forexray trading account calculates current margin depending on the currency pair you want to trade.

For currency pairs that are not part of your base currency, the margin is conveniently converted into your base currency in the prevailing market price for the current pair.

Forex Leverage at Forexray

At Forexray, we offer a ‘Leverage to Suit’ model. This is applicable on all Forex trades and has proven to provide clients with the best flexibility as far and risk and trade are concerned. It means that our clients can choose whatever leverage scale they prefer to trade with, depending of course on careful consideration about what suits their strategy and risk level.

The Forex ‘Leverage to Suit’ model gets traders the choice between a scale range of options, starting from 5% to 0.25%. This is 20 to 1, and 400 to 1 ratio respectively. 

 

ForexRay Team

ForexRayTeam has an extensive range of financial instruments allowing individuals and establishments to make investments in exchange and stock markets.

ForexRay Team

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ForexRay Team

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