Advantages of Trading Forex 07 - Use of Leverage and Margin

This is the advantage which drags more and more investors towards Forex Trading. Forex brokers permit traders to trade the market using leverage and with low margin, which gives the ability to trade more money on the market than what is available in your account.

Which means, in forex trading with a small deposit you can control a much higher total contract value. Leverage gives the trader the chance to make higher profits, and concurrently keep risk capital to a minimum.

[See Also: What is Leverage and Margin in Forex Trading?]

For example, a forex broker may offer 100-to-1 leverage, which means that a $25 dollar margin deposit would enable a trader to buy or sell $2,500 worth of currencies. Similarly, with $100 dollars, one could trade with $10,000 dollars and so on.

While this may sound like heavenly dreams, be cautious that taking very-high leverage, without risk management, may wipe-out you balance within a couple of minutes.

[See Also: What is a Margin Call in Forex Trading? How to Avoid One?]