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Leverage gives the traders the ability to trade with more than they actually have. Say for example you have 500:1 leverage, that means that for every $1 USD, you actually have control of $500 USD in exposure to use and participate in the forex market with. Thus, you can greatly increase your profits, however, you can just as easily incur significant losses.
Margin is the amount of funds you need to place a trade, also known as margin requirement. The amount that you need in margin depends on the trade volume that you choose to open. You will have a margin regardless of what leverage you choose to have. For positions with higher leverage i.e., 500:1 you will only need a small percentage of funds to place a trade. Conversely, for positions with lower leverage i.e., 25:1 you will need a larger portion of funds to place a trade.
Say, for instance, you have 500:1 leverage and you try placing a 1.0 standard lot (100,000 units of the base currency) of EURUSD in your USD trading account. You can determine how much you need in your account to place this trade using the following formula:
lot size x current price / leverage = margin required
In the example above, this will be the following:
100,000 EUR x 1.101 EUR / USD500 = 220.2 USD margin required
Now let’s consider the same example with a lower leverage amount, for example 1:1 leverage.
100,000 EUR x 1.101 EUR/USD / 1 = 110,100 USD margin required
As you can see from this example, you would need a lot of money to trade 1.0 standard lot of EUR/USD. Ultimately, the extent to which you leverage is entirely your choice.
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Risk Warning: Margin trading involves a high level of risk, and may not be suitable for all investors. You should carefully consider your objectives, financial situation, needs and level of experience before entering into any margined transactions with Baxia Markets, and seek independent advice if necessary. Forex and CFDs are highly leveraged products which mean both gains and losses are magnified. You should only trade in these products if you fully understand the risks involved and can afford losses without adversely affecting your lifestyle (including the risk of losing the entirety of your initial investment). You must assess and consider them carefully before making any decision about using our products or services.
Baxia Global Limited is a company registered in Seychelles with registration number: 8426970-1, and is regulated by the Financial Services Authority of Seychelles with License number: SD104. Baxia Limited is a company registered in The Bahamas with registration number: 177330 B, and is licensed and regulated by The Securities Commission of The Bahamas (SCB), (SIA-F234). Baxia Markets is a member of The Financial Commission, an international organization engaged in the resolution of disputes within the financial services industry in the Forex market.
The information on this website is general in nature and doesn’t take into account your personal objectives, financial circumstances, or needs. It is not targeted at the general public of any specific country and is not intended for distribution to residents in any jurisdiction where that distribution would be unlawful or contravene regulatory requirements. Baxia Markets does not offer its services to residents of certain jurisdictions such as USA, Cuba, Sudan/Republic of Sudan, Syria, Iran, Iraq, South Sudan, Venezuela, Libya, Belarus, Afghanistan, Myanmar, Russia, Crimea, Donetsk, Luhansk, Palestine, Yemen and North Korea.