What Does the Leverage Effect Mean in Forex?


One of the things that makes Forex attractive as an investment tool is leverage. Forex leverage is an opportunity that allows you to trade above your capital with the money that the contracted institution will put into your account. With leverage, you can earn much more than the capital you have. It helps to take the right steps when using leverage, which can be harmful if not used carefully.

What Do Leverage Effect Ratios Mean?

Leverage effect ratios are expressed in ratios such as “1:100″. the ratio of 1: 100 is read as ”100 to 1”. The leverage ratio is determined by the brokerage house. The maximum leverage ratio that can be used is 1:500; however, according to the regulations of the Capital Markets Board, the maximum leverage ratio that can be used in England is 1:100.

To explain the leverage effect ratio with a simple example, let’s say you have 100 GBP of capital. If you are offered 1: 100 leverage by the brokerage house of your choice, you will have traded 10,000 GBP on the Forex market, not 100 GBP. We recommend using leverage at low rates, as it will increase the risk of using leverage at high rates.

How to Decipher Forex transactions; Forex refers to the set of international markets where currencies are bought and sold using the exchange rate between the currency of one country and the currency of another country. The Forex market is one of the largest markets in the world and offers leveraged trading opportunities to its investors.

How the Forex market works; The Forex market is about buying one currency and selling another at the same time. Forex traders actively try to make a profit by buying and selling currencies, thinking that they will get their money’s worth in the coming periods. The start date of the Forex market is considered to be 1976.

Is Forex reliable; The Forex market is under the control of the Capital Markets Board (CMB). In addition, each country has its own Forex market, which is subject to its own legal controls. The Forex market in England is supervised by the CMB.

How much money is needed for Forex; According to the new press release published on 02/10/2017, the lower limit required to be able to trade on the Forex market has been set as GBP 50,000 or its equivalent in foreign currency. In order to trade on the Forex market, the investor must deposit at least 50,000 GBP collateral or its equivalent in foreign currency.

Is there a state guarantee on Forex; Subject to the CMB regulation, Forex has been legal in England since August 2011. In other words, investor rights are guaranteed by the state. You can use the platforms of brokerage firms to trade Forex.

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