By taking advantage of TradeFW’s leverage ratio, you can potentially turn a modest initial investment into investment opportunities.
What draws so many investors around the world to forex? The first answer might very well be leverage.
Leverage trading is the investment strategy of using borrowed capital to increase the potential return of an investment. In the case of forex, the capital is a loan provided by a broker, but theoretically it can be any financial instrument as well. By itself, leverage also can mean the amount of debt relative to assets incurred as a result of trading.
To take advantage of leverage trading, the investor must first open what is called a margin account with a forex broker. When you do so you will see that the amount of the leverage is expressed as a ratio, which expresses the size of the loan compared to your own investment. Here at TradeFW, we provide our valued clients with a ratio of up to 1:30. That means that in the event you see the right deal on the horizon, you can trade up to 100k using just 3333 of your own funds. If used correctly, leverage is an incomparable tool for creating opportunities.
Margin trading is another investment strategy of using capital borrowed from a broker. But in the case of margin trading, the loan is used to trade a financial asset that then becomes the collateral. Almost every type of security can be traded on the margin, including forex, commodities, futures, and selected stocks. In the stock market, however, margin trading has a slightly different meaning. There it refers to the acquisition of more shares than otherwise could be afforded.
Why is it called margin trading? Because a margin, in this context, is the collateral that has to be deposited with a broker or an exchange in order to lessen the credit risk involved in using this strategy to leverage an investment.
The specifics of the loan are expressed as a leverage ratio. The leverage ratio is measured using statistics that measure what percentage of the total capital involved in a trade represents debt (from loans) and the capacity of the borrower to meet his or her financial obligations.
Once you start to trade you have what is known as a position. A position is the amount of any currency, commodity or security that a trader, or even an institution or a dealer, own. A position can be held over an extended period (known as a long position) or borrowed and quickly sold (known as a short position). And since you’re the one who gets to decide what position you’ll take, you can maximize your access to leverage time and time again.
TradeFW leverage trading is a tool for making the most of the forex market.