The leverage available in FOREX trading stands out as one of main attractions of this market for many traders. Leveraged trading, or trading on margin, simply means that you are not required to put up the full value of the position.
FOREX provides more leverage than stocks or futures. In FOREX trading, the amount of leverage available can be as much as 500 times the value of your account.
There are several reasons for the FOREX market offering higher leverage. On a day to day basis, the volatility of the major currencies is less than 1%. This is much lower than an active stock that can easily move 5-10% in a single day. With leverage, you can capture higher returns on a smaller market movement. More importantly, leverage allows traders to increase their buying power while utilizing less capital to trade. Obviously an increase in leverage increases risk.
FOREX provides more leverage than stocks or futures. In FOREX trading, the amount of leverage available can be as much as 500 times the value of your account.
There are several reasons for the FOREX market offering higher leverage. On a day to day basis, the volatility of the major currencies is less than 1%. This is much lower than an active stock that can easily move 5-10% in a single day. With leverage, you can capture higher returns on a smaller market movement. More importantly, leverage allows traders to increase their buying power while utilizing less capital to trade. Obviously an increase in leverage increases risk.
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