How are losses made in forex trading
What is Leverage (Leverage)?
What is the leverage ratio?
The leverage ratio describes the total exposure of your trade in relation to the premium, the purchase price or the margin requirement. Your leverage ratio will vary depending on the market you are trading, the provider you are trading with and the product you are trading with. It also depends on your position size.
Let's go back to the top, for example: A premium, a purchase price or a margin of 10% offers the same exposure as a traditional € 1,000 investment, but with a deposit of just € 100. In this case, there is a leverage ratio of 10: 1.
In most cases, providers for underlying markets with high volatility or lower liquidity will offer a lower leverage ratio to protect your positions from rapid price movements. On the other hand, extremely liquid markets like Forex can have particularly high leverage ratios.
Barriers, like turbos, allow you some control over your leverage. When you open your position, you set your knock-out level (at which your trade will be closed should the market move against you) and your trade size. These factors, together with the underlying market price, determine the premium or the purchase price - so if you change them, your leverage ratio is automatically adjusted.
This table shows how different leverage ratios affect your exposure (and thus the profit and loss potential) with an initial deposit of € 1,000.
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