Is leverage a factor in FX trading?
Leverage is the key to understanding both the risk and reward associated with trading the Forex market. Many Forex brokers offer leverage as high as 200:1, meaning that $50 of margin would control a $10,000 position in the market (this is an example of a mini lot). To some extent, higher leverage is a necessary evil in Forex trading. It can offer advantages over equities trading, but only if it is properly understood and utilized. Though currency values on a global stage are constantly in a state of flux, high liquidity and market stability translate to relatively small daily price movements Without high leverage most retail investors would not be able to afford trading in the Forex market. However, with increased buying power comes increased risk. Traders who are new to the market often make the mistake of over-trading their account. Because relatively small margin is required to open large positions freshman traders often make the mistake of opening too many positions at one time. A
