The successful trading history of someone is one of the reasons that many people are interested in forex trading. Whatever the purpose, it is certain that if you intend to learn all about forex trading, then your chances of becoming a successful trader will be wide open.

But of all the things that you will learn, there is one major factor in forex trading that you may not find from trading other financial instruments, namely, leverage. So, understanding this leverage is very important to know before plunging into the world of forex.

Leverage is the use of borrowed funds that aims to increase the potential return on the investment made. With leverage, traders, including you, can make forex transactions with a capital that is much smaller than the capital that should be used.

Tips for Using Leverage in Forex Trading from The Best Forex Broker

Without leverage, the capital required for a transaction must be the same as the applicable contract-size value. The contract-size for each forex transaction alone amounts to $ 100,000. Even though there are lots of opportunities in the forex market and not all opportunities can make a profit.

Here is the main role as well as the benefits of leverage. For example, using 1:100 leverage to make transactions with a contract size of $100,000, you need to spend $1,000 only (called margin). Leverage is a medium that will bring you closer to successful trading.

In forex trading, leverage is usually displayed in a certain proportion, for example, 1:25, 1:50, 1:200, 1:1000, and so on. For example, you are trading with 1:400 leverage. This means that with a minimum capital of 500 dollars, you can make transactions worth up to 20,000 dollars.

By using leverage, you can reach a large potential profit with a much smaller capital. That way you don't have to worry too much about a very large loss. Leverage is used by all traders, both beginners and pro forex traders.

Knowing Margin Leverage That Can Help You Get Successful Trading

There are two types of leverage that you need to know, namely margin leverage and real leverage. Trading using leverage can be interpreted like you are borrowing money temporarily from a brokerage company in a certain nominal amount by providing collateral in a small amount.

This guarantee is proportional to the loan obtained. This guarantee is often referred to as Margin. The greater the leverage used, the smaller the margin (security deposit) required. The calculation is the required margin = leverage x transaction value.

Didimax forex broker will make it easier to understand. Let's go back to the previous example where you used 1:100 leverage and spent $1,000 in the capital (margin) to make transactions with a $100,000 contract size.

Even if you only have $1,000, you can still make $100,000 worth of transactions because the capital required is only $1,000. This means that the trading capital you need is only 1% of the actual transaction value. This 1: 100 leverage is known as margin leverage.

You Can Make Successful Trading Realize by Understanding Real Leverage

Understanding real leverage in forex trading is much more important than margin leverage. The method is quite easy, you just have to divide the total transaction value from your open positions by the total capital you have. For example, you have capital in a trading account of $10,000.

At that point, you open a position of 1 standard lot worth $100,000. It means that you are making transactions with leverage 10 times greater than the capital you have. If you open a position of 2 standard lots, the leverage is 20 times greater than your capital.

It is very important to pay attention to the real leverage you are using. You could face greater risk along with greater leverage. The main key to using safe forex leverage lies in sound capital and risk management.

According to Didimax broker, as long as it is accompanied by risk and money management and a good trading plan, you can control the risks from using leverage. Using the right leverage method will lead you to successful trading.