Forex Leverage for Beginners Explained (lot sizes and pips)
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- Опубліковано 27 бер 2021
- Forex leverage is a great tool for beginners in forex trading to understand. In this video I will explain everything you need to know about forex leverage, pip, and lot sizes.
Leverage involves borrowing a certain amount of the money needed to invest in something. In the case of forex, money is usually borrowed from a broker. Forex trading does offer high leverage in the sense that for an initial margin requirement, a trader can build up-and control-a huge amount of money.
To calculate margin-based leverage, divide the total transaction value by the amount of margin you are required to put up:
Margin-Based Leverage = Total Value of Transaction / Margin Required
For example, if you are required to deposit 1% of the total transaction value as margin and you intend to trade one standard lot of USD/CHF, which is equivalent to US$100,000, the margin required would be US$1,000.
Margin-Based Leverage Expressed as Ratio Margin Required of Total Transaction Value
400:1 0.25%
200:1 0.50%
100:1 1.00%
50:1 2.00%
However, margin-based leverage does not necessarily affect risk, and whether a trader is required to put up 1% or 2% of the transaction value as margin may not influence their profits or losses. This is because the investor can always attribute more than the required margin for any position.
To calculate the real leverage you are currently using, simply divide the total face value of your open positions by your trading capital:
Real Leverage = Total Value of Transaction / Total Trading Capital
For example, if you have $10,000 in your account, and you open a $100,000 position (which is equivalent to one standard lot), you will be trading with 10 times leverage on your account (100,000/10,000). If you trade two standard lots, which are worth $200,000 in face value with $10,000 in your account, then your leverage on the account is 20 times (200,000/10,000).
In the foreign exchange markets, leverage is commonly as high as 100:1. This means that for every $1,000 in your account, you can trade up to $100,000 in value. Many traders believe the reason that forex market makers offer such high leverage is that leverage is a function of risk.
In trading, we monitor the currency movements in pips, which is the smallest change in currency price and depends on the currency pair.
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I watched like 5 videos explaining leverage and this is the only one I understood, thanks man! 👍🏼
Thank you! I’ve been looking for videos that thoroughly explain leverage and how to use it/set it up. It was not explained on the trading view tutorial video (a 20 minute video) and I want to practice paper trading using leverage just to get a feel for what I’m comfortable with!
Soooooo many videos but this one takes the cake! Well explained and thank you sooo much for breaking it down :) Subscribed!
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you are by far the best to explain this in terms that can be understood by a complete trade newbie like myself. I literally know zero about trading but would really like to learn, and your videos are the only ones explaining so it's easy to understand! - THANKS!!!
You’re so welcome 😉
Absolutely love your content, thank you!
Best video in UA-cam about leverage
fam this is a life saver idk why others dont make it clear like this
wow after watching so many videos now is very clear to me what a pip really is. Thanks
You earned a subscriber. Thank you so much for the amazing clean explained video tutorial.
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Thank you. Explained perfectly!
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have you made any progress bro?
Same bro thoughts here bro. any progress?. ive just started my demo account $1000 now 1:100 leverage
@@noelnemenjo1242 Who do you open the demo account with? Could you please let me know? Thanks.
I would love to hear an update good luck bro :)
any update brother on your progress ?
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thank u so much i would reccomend every begginers to watch this video for better understranding in these terms
Hey, just wanted to say thank you a lot, been learning about day trading for a bit and this video explained the very basics so clearly and thoroughly it just made it all make even more sense.
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The American leverage is inaccurate, I have a 50:1 with American broker. I've had it since 2018.
But I love the channel and keep up the good work. 👍
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Can you do for gold calculation as well, thank you.
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This is the best video on leverage.
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Thanks man, i just started in forex with a leveraged account, and this video made it much more clear of how it works, and also i understand that i had a really lucky win on my 1st trading day(made 970 out of 500 with a 1:200 leveraged acc)
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Arty do you have a video on risk management? What you recommend and some suggested rules to follow?
Bro in have watch sooooooooooooooooooooooooooooooooooooooooooooooo many video to understand this and I finally get it thank U sooooo much I'm definitely gonna join the trading floor
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My pleasure
Very informative
A very good explanation on leverage. Thank you sir
Most welcome!
I'm sure nobody will look, but i like this while rewatching videos or specific parts..
0:00 Intro
0:47 Start
1:12 A pip
1:40 Lot sizes
2:20 Win examples
3:19 1 SL Order
3:56 Leverage comes into play
5:30 Sumup
5:58 Tools for calculating
6:35 Demo trades
7:06 Outro
ThankU
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I got that right because of you %💯 thanks
Sweet good to hear
Very clear explanation. Thank you.
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Love your videos man. Dang so how much are people trading to actually make money like this? If you drop a standard lot and get a 10 pip gain you “put down” 100k to make $100? That sounds crazy.
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ty
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And can you please also suggest the best leverage for a small account?🙃
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What calculators can calculate how many pips needed for a certain profit using leverage along with the this along with the amount of pips that bring you to the “point of liquidation”?
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Nice video bro, I would suggest u include a breakdown of how much a position can cost you based on the leverage of your account
I’ll put in the next video I do on leverage
@@TheMovingAverage I have a $1500 account. What's the best and safest lot size trading gold with a 1-500 leverage? The best lot size info I what I really need to know. Thanks in advance.
@@TheMovingAverage Please
Very useful video thankyou
Welcome 😊