Traders use leverage to increase returns without increasing the investment size. The currency market is one of the most popular markets for speculation because of the high degree of leverage available.
FX allows greater leverage than the equities, futures or options markets. Regardless of who you trade with, your trading platform should monitor and control risk exposure in real-time.
Mini accounts offer leverage of up to 200:1, meaning a $50 margin deposit opens a 10,000 base currency position in the market. Your FX broker automatically calculates both the funds needed for current positions and the funds available for taking new positions. This information displays to clients in real-time.
In the event funds in the account fall below margin requirements, your broker automatically closes all open positions - this is referred to as a margin call. This prevents clients' accounts from falling below the actual available equity.
Leverage is a double-edged sword. Without proper risk management, this high degree of leverage can lead to large losses as well as gains.
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