Lot Sizes and Leverage in Forex Trading

Posted on February 14, 2008
Filed Under Forex Education |

I think most of you will know by now that one of the major advantages in Forex Trading is the high degree of leverage provided by most brokerage companies. In the Forex market, depending on which brokerage firm a trader use, $1,000 could control $100,000 in currency. Such controlling leverage of 100 to 1 is quite typical of most trading account. Using $1,000 to control $100,000 is also known as “margin”.

In the last few years, lots of brokerage firm have offer e-mini account which may be funded with as little as few hundred dollars. Such account minimum lot size will be $100, which in return control $10,000 in currency value.

With such leverage or margin, a 1% relative change in a currency will equate to about 100% return on investment if the trade is in the trader’s favor. There have been many discussions on the topic of margin or leverage and some argue that high leverage is dangerous. For most investment vehicles, leverage is a double-edge sword. This is a point for the individual concerned to mange their own risk. In the Forex Trading arena, managing of one’s risk is in essential the most important element towards a trader trading success.

Cheers, Kampai, Proscht^^!!

Comments

2 Responses to “Lot Sizes and Leverage in Forex Trading”

fxpro on February 14th, 2008 3:35 am

[…] Great Forex blog……]
jeff on February 14th, 2008 7:08 am

After going over your blog, I find your post very informative. Most interestingly, you are able to add humor to such a serious business like Forex Trading. Keep it up!!

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