MARGIN VS LEVERAGE: What is the difference?
Margin vs Leverage: What is the difference?
The use of leverage and margin is a frequent way for dealers to devote a relatively modest amount of money to expose themselves into greater value trades and, possibly, higher gains. Nevertheless, this may also introduce you to a considerably higher degree of danger, including losses that could exceed the original investment. Because of the potential hazard, it's extremely important to know what margin and leverage are, how they operate and your duties as a forex trader.
Although they are interconnected, leverage and margin aren't similar. Leverage refers to taking on debt, even whilst margin is debt or borrowed money a firm uses to invest in other financial instruments.
Margin Versus Leverage:
Leverage
Using leverage means that you can control trades of greater worth than the margin you've got.
Margin
Margin is the number of money you will need to have on your trading account so as to open a trade. To retain an open position you must also always maintain adequate margin in your account.
Choosing your Leverage Amount
With leverage up to 500:1 available in certain areas, IC Markets customers can decide on the level of leverage that's suitable for them. Leverage can be altered through the MT4 platform prior to placing a trade, or via your personal preferences from the IC Markets Client Portal.
Examples of Forex Leverage
Let us assume that you're a forex trader located in the U.K. and also have an account with an online forex broker. You set up $5,000 as margin, that's the equity or collateral in your trading account. This implies that you could initially place a max of $250,000 ($5,000 x 50) in money trading positions. This amount will obviously fluctuate based on the gains or losses which you create (notice: this and the cases below are gross commissions, interest, and other charges).