How to Calculate Leverage Margin and Pip Values in Forex - best mobile forex trading app

How to Calculate Leverage Margin and Pip Values in Forex ~ best mobile forex trading app

How to Calculate Leverage, Margin, and Pip Values in Forex

1-Leverage and Margin

Most forex brokers allow a very high leverage ratio, or, to put it differently, have very low margin requirements. This is why profits and losses can be so great in forex trading even though the actual prices of the currencies themselves do not change all that much—certainly not like stocks. Stocks can double or triple in price, or fall to zero; currency never does. Because currency prices do not vary substantially, much lower margin requirements is less risky than it would be for stocks.

Most brokers allow a 100:1 leverage, or 1% margin. This means that you can buy or sell $100,000 worth of currency while maintaining $1,000 in your account. Mini-accounts can have leverage ratios as high as 200.

The margin in a forex account is a performance bond, the amount of equity needed to ensure that you can cover your losses. Thus, you do not buy currency with borrowed money, and no interest is charged on the 99% of the currency’s value that is not covered by margin. The margin requirement can be met not only with money, but also with profitable open positions. The equity in your account is the total amount of cash and the amount of unrealized profits in your open positions minus the losses in your open positions. Your total equity determines how much margin you have left, and if you have open positions, total equity will vary continuously as market prices change. Thus, it is never wise to use 100% of your margin for trades—otherwise, you may be subject to a margin call.

So if you buy $100,000 worth of currency, you are not depositing $1,000 and borrowing $99,000 for the purchase. The $1,000 is to cover your losses. If the equity in your account drops below the margin requirement, then you will have to deposit more money, or the broker will liquidate your positions. Thus, buying or selling short currency is like buying or selling short futures rather than stocks.

Leverage is inversely proportional to margin:

Leverage = 1/Margin = 100/Margin Percentage
Margin Percentage = 100/Leverage

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10 Pips Per Day Low Risk High Return - forex_ news_market_clock.ex4

10 Pips Per Day Low Risk High Return ~ forex_ news_market_clock.ex4

Are 20 Pips daily enough? If you trade 1,000,000 worth of currency, each movement would be equal to $100. So if you bought at 1.7839 and sold at 1.7859 then you would make 20 pips x $100, or $2,000. Now, I don’t know about you, but I could think most people could live in comfort zone with $2,000 per day.

Most traders are greedy, they’re always try to make a zillion dollars on every trade. This leads them to stay in a good trade too long, hoping to get more money out of it. This can lead to disaster the trade can move against them and they get creamed. It’s the single greatest fools in trading. But you can already understand why that’s probably true. But how do you leave greed when trading? We’ll get to that in a moment.

Let’s simplify the calculation, forget about those 20 pips If you can earned just 10 pips every day for the next 12 months, and you started next year with over $100,000 in your trading accont, you would be making between $10,000 and $17,000 per month trading (depending on your risk tolerance). Can you do this? Absolutely. Can you do this today? Maybe, maybe not. You have to dedicate yourself 100% to learning how to trade intelligently.

You should be grateful for any profit the market gives you. Don’t spend any time crying about how you didn’t get the maximum profit, or how you could have gotten so much more profit if you just stayed inthe trade longer. Instead of looking for mega zillion trade system, I set up good trade that have a lot of potential, and then I shoot for 20 pips as an initial target. Just 20 pips. That’s it. I don’t let myself lose a lot of money. I only try to get 20 pips and you know that I can get it. Trade Smart don’t trade Hard.

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10 Pips Per Day Trading Leverage - forex news_market_clock.mq4

10 Pips Per Day Trading Leverage ~ forex news_market_clock.mq4

Forex traders like to trade in high volumes for greater profits. But this does not mean that they always have the right kind of money. How to gain a good amount for smallest fluctuations then? This is where margin money and leveraging comes in handy.

Suppose you have $40000 and you are leveraging at 200:1, then you can use $200 to trade the share at such volumes. As soon as the share loses 200 dollars, the deal gets automatically closed. This would mean that 5 percent is all that the share needs to fall for the deal to get stopped.

It gives the traders wholesome opportunities to earn through an extended range of profit. This is how leveraging lets a trader deal in high volumes. It can be a great ally of those who know the precision entry and exit points more often than not.

Generally, the leverage spread is between 50:1 and 200:1.The 500:1 leverage is also not unheard of. If your share is trading in the right direction, you can keep amassing profits with what you have as leverage. Traders use leverage to lever their investments with instruments like forex, futures, forwards, options and margins.

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