Leverage
Trader to leverage an opportunity to increase the potential returnon investment. Anyway, leverage can be operated in twodirections, which increases the potential risk. Thus, leverageincreases as the possibility of profits and losses. Trade withleverage means that you do not have to pay or provide a full priceposition. Foreign Exchange provides greater leverage than stocksor futures. In trading on the forex market leverage available can beup to 200 times greater than the sum of your account.
Leverage - the ratio between the collateral and allocated under its loan capital. Instead of specifying the size of the margin indicate the size of the shoulder as a ratio, which shows the ratio of collateral to the size of credit granted. For example, a margin 25% correspond to the shoulder of 1:4, a margin of 1% match shoulder 1:100. In this case we say that the merchant receives the funds to trade in 5 (or 100) times larger than the size of his security deposit.
In the currency market higher leverage, and for this there are several reasons. During the day the major currencies vary by less than 1%. This is much lower than an active stock, which could easily move to 5-10% per day. With leverage you can get higher returns with less fluctuation of the market. Most importantly, leverage allows traders to increase their purchasing power and use less equity in the trade.
Margin trading involves transactions with the assets acquired from a broker in credit. It can be both cash and traded goods: for example, stocks, standard contracts. For credit for more than a day fee is charged. This is usually specified percentage of the loan amount or market value provided in the loan assets. Typically, the interest rate depends on the kind provided in the loan asset and focuses on current interest rates of similar operations in "normal" inter-bank lending.
In the currency market higher leverage, and for this there are several reasons. During the day the major currencies vary by less than 1%. This is much lower than an active stock, which could easily move to 5-10% per day. With leverage you can get higher returns with less fluctuation of the market. Most importantly, leverage allows traders to increase their purchasing power and use less equity in the trade.
Margin trading involves transactions with the assets acquired from a broker in credit. It can be both cash and traded goods: for example, stocks, standard contracts. For credit for more than a day fee is charged. This is usually specified percentage of the loan amount or market value provided in the loan assets. Typically, the interest rate depends on the kind provided in the loan asset and focuses on current interest rates of similar operations in "normal" inter-bank lending.
Entirely different meaning in the forex market has the word"margin", rather than in stocks. In the contests of "trading onmargin means that a trader can borrow up to 50% of the value of shares to buy these shares. This can be a costly step becauseinvestors must pay brokerage firm discount rate on the borrowedamount. In trading on the currency market, it looks quite different.
For example, $ 131 per share, 100 shares of Norilsk Nickel,valued at $ 13.100 ($ 131 × 100 shares). In order to trade theseshares on margin required 50% deposit, namely $ 6.550. On theleft, borrowed $ 6.550 to pay the interest. Margin percentagediffers from broker to broker, but typically consists of the interestrate of 1-5% or higher.
For example, $ 131 per share, 100 shares of Norilsk Nickel,valued at $ 13.100 ($ 131 × 100 shares). In order to trade theseshares on margin required 50% deposit, namely $ 6.550. On theleft, borrowed $ 6.550 to pay the interest. Margin percentagediffers from broker to broker, but typically consists of the interestrate of 1-5% or higher.
