Leverage Meaning and Examples
Leverage allows traders to open larger positions with less capital. Trading with leverage is considered to be one of the main benefits associated with CFD trading to maximise earning potential.
This provides traders with the opportunity to generate greater profits from even the slightest market movements. In the Forex market, for example, price movements are often quite small, so forex traders may use leverage to amplify their profits from changes in currency pairs.
With LonghornFX, traders can open positions on a large variety of assets, using the following leverage ratios:
- Forex – 1:500
- Metals – 1:500
- Indices – 1:200
- Energy – 1:200
- Crypto – 1:100
- Stocks – 1:20
What is a Margin?
The Margin is the amount of money needed to open a position with leverage. A 1:500 leverage setting means that for every $1 that the trader inputs, the position size is amplified to $500. So, if a trader wants to open a position of $10,000 on the GBP/USD currency pair using leverage 1:500, the required margin will be $20.