Advantages and disadvantages of "LEVERAGE"

Advantages and disadvantages of using margin trading "LEVERAGE"

The rapid development of Internet and the international currency market in mid-1990's led to a practical trade currency to extract income were involved hundreds of millions of private investors. Ability to deal with not only the currency exchange points in the bank, but also directly on the exchange, bypassing intermediaries, attracted to this market means many investors, increasing its liquidity. It is for this reason FOREX into a universal, high-yield, open and most liquid market in the world.

Moreover, profitability of operations in FOREX by several orders of magnitude higher than that of operations in exchange. This was made possible with the invention of machinery margin trading, which in a few years led to the formation of entire institutions, currency trading to help small investors to operate in FOREX an equal footing with larger players that determine the state of international economy and politics: national banks, large investment companies and other financial institutions, vorochayuschimi billions of dollars.

Happiness small investor is obliged to operate in FOREX only so-called shoulder, or by simply, in English - Leverage. We will thoroughly and in detail to give the exact calculations and clever formula. There are profound literature, margin trading, using Leverage is the foundation of all activities in the market FOREX. We just wanted to raise objections about the articles in the first issue FOREX MAGAZINE, the author of sokrushaetsya about - oh, horror! - The possibility of big losses when trading with leverage of 1:100, and even suspects terrible, terrible and treacherous brokers that they were lured to their specific network simple trusting lovely traders. Not without artful brokers in this world, of course. But we do not talk about them, as a tool - on the shoulder, that is on the basis of margin trading.

Let us leave on the conscience of the author's assertion that the shoulder will inevitably lead to losses. So you can agree to that and bricks down on somebody's head, is guilty of a crime, and therefore it should be once and for all ban. Investigate that gives Leverage, for which he needed, and well I use the shoulder, which we, traders, brokers provide. But at the same time, and what are the "shoulders" are found in the market, and which may, indeed, should not rely.

So, the most common size of the shoulder on the FOREX for investors operating amounts from 300 to 10-15 thousand dollars - 1:100. What happens to your money when you open the account with a broker, is starting to buy and sell currency? What does it mean that the shoulder?

After purchasing, for example, one standard lot, you actually bought a thousand dollars of your deposit with a broker in a hundred times more: 1000h100 = 100.000 dollars and exchange them for dollars. But really in the hands of the money you get can not, yet that had not yet invented a mechanism for a real deal, except robbery. That's the essence of margin trading: you get over the 100,000 U.S. dollars that you give to free loan, the amount of dollars that you can afford at the rate prevailing on the FOREX-market in the twinkling of the transaction. And if obmennike bank rate changes twice a day, the FOREX - every minute, and sometimes every second. If for example you are lucky (or you are clever), and now you buy for example, 78 740 dollars at the rate of 1.27, then after 5 minutes, saw that the rate of 1.2730 is already, you can sell 78 740 euro, with the account of the amount of 100,236 dollars. However, since 100000 you like to give credit, then you are obliged to return them, and your "fat" is 236 dollars.

So, actually, "shoulder" in itself - just a tool to operate in the market FOREX considerable amount, and get serious profit Taya work with very small by the standards of FOREX, the capital. Is there a risk? Of course there is. But the measure of the risk involved - it's your choice. If your capital of $ 10,000, then you have the right to take risks in a transaction not more than 3% of its capital, that is translated into concrete realities of the deal - you can afford in the moderate-risk strategy for trade to stop-loss, 30 points from the price (if you're working with one LOTO). However, if you're not lucky, and you will lose - that no more than $ 300. But if you have "guys are crazy and you do not take a lot for these conditions, as, for example, five, then your potential loss (with stop-loss of 30 points from the price) will have $ 1500 or 15% of the capital. And this has nothing to do with his shoulder. You or tolerated rollicking game, or make it clear what you can afford it or not. And if you do not like risk - and do not need to trade on the FOREX - put money in the bank and get their unfortunate 12-17% per annum. There is no leverage, no risk, no champagne. We should not lament about the terrible risks. They are on the FOREX is, and nothing would not be helped. Do you want to reduce them - save the experience, money, and as soon as you dial 30000 extra dollars - you can easily find a brokerage company with a "shoulder" from 1:50 to 1:30. Major brokerage companies are working with such amounts and with such "shoulders".

However, the market is extended to provide leverage and more than 1:100. For example, GCI (http://www.gcitrading.com) provide an opportunity to trade their clients $ 500 for a standard lot for all instruments, which is equivalent to approximately 0.5% margin or leverage of 1:200.

And here is the shoulder, of course, has a potentially much higher risk than even the much more common 1:100. But again - you need not make claims to the broker, and, above all, to himself. If you can afford such risks in terms of money management, and feel confident enough in the market, why not? Because the shoulder is not only bears the greater the risk - and huge profits. So - who is not in danger - do not drink champagne.

Be in yourself and your equity: if you want, you can and you know how to take risks and win - you no "shoulder" is not scared. If you prefer a conservative trade with less risk, and you have the risk capital of at least 30-50 thousand dollars - you must choose a reliable solid broker, providing the shoulder 1:30. If you are in zakromah "hundreds of millions of dollars, and you do not have to shoulder it - you can trade on FOREX as a major player - through its own bank.

VLADIMIR TRUBITSYN
The analyst, trader