What is Leverage & Lot Size And Margin in Forex?
What is Leverage in Forex?
A loan from your broker that support your account to open maximum lot size for trade is called leverage. many brokers provide different leverage like 1:3000 , 1:1000 , 1:500 , 1:100 etc.
What is Lot Size?
The number of currency units you will buy or sell that called lot size. in forex 4 types of lot size.
1:- Standard lot size
Standrad lot size equal to 100,000 currency unit.
2:- Mini lot size
Mini lot size equal to 10,000 currency unit.
3:- Micro lot size
Micro lot size equal to 1000 currency unit.
4:- Nano lot size
Nano lot size equal to 100 currency unit.
How to calculate the margin?
For example your broker leverage is 1:1000 and you want to open standard lot size for buy or sell.
Margin= Lot size/Leverage=100,000/1000=100 usd margin.
For example your broker leverage is 1:500 and you want to open standard lot size for buy or sell.
Margin= Lot size/Leverage=100,000/200=200 usd margin.
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Leverage allows traders to control larger market positions with less capital. It is a loan provided by fbs bonus to increase the potential profit (and risk) of a trade. For example, with 1:100 leverage, you can control a position worth $10,000 by depositing only $100. While leverage can increase profits, it's important to remember that it also increases potential losses, so risk management is critical. Lot size refers to the volume or number of trades. There are three main types of lots in forex trading: standard, mini and micro. A standard lot represents 100,000 units of the base currency, a mini lot represents 10,000 units, and a micro lot represents 1,000 units. The lot size determines the value of a pip, which is the monetary expression of the movement of a currency pair by one pip.