Leverage Margin and Swap

2023/2/25 18:04:12  read(3)

Leverage forextrad howtocopyforextradinggsignal MarginLeverage and margin (also known as prepayment on the MT4 platform) are like the obverse side of the same coin, they actually refer to the same conceptWe are here to illustrate how cashback forex and margin work in trading with an example Suppose a 1 lot USDJPY position best forex copy trading established and the value of the position is $100, 000 USD: -> When the leverage ratio is 1:1, the margin occupied by the position is 100,000 USD That is, you need to have at least 100,000 USD to open an equivalent position (the stock market is a 1:1 leverage market) => When the leverage ratio is 400:1 When the leverage ratio is 400:1, the margin used for the position is $100,000/400=$250 That is, with 400 times the leverage, you can open a position worth $100,000 with $250 as margin Keep in mind that margin is a deposit needed to set up a new trade, it is not a charge to you When a trade is opened, a portion of your account The greater the leverage, the smaller the margin available for the trade. When the trade is closed, the margin available becomes available again for your account to open new trades or to maintain floating losses on other positions We generally advise traders to use leverage carefully. In the example above, assuming $100,000 in the account, with a leverage ratio of 1:1, you can only open 1 lot of USDJPY, and when the leverage ratio is 400:1, you can open up to 400 lots of USDJPY (100,000/250), the potential risks and benefits are magnified while the trading volume increases * How much profit or loss per pip movement Depending on the currency pair and the prevailing exchange rate in the table above can clearly see that the greater the leverage, the larger the position that can be opened with the same amount of capital, while the market volatility of the capital gains and losses also increase in the same proportion When using leverage, you also need to prevent the risk of a blowout: If you open a position that is too large, and the price is constantly fluctuating in the direction of the position is unfavorable, when the account equity (following the If the position is too large and the price keeps fluctuating in the direction of the position, all positions in the account will be forced to close immediately when the account equity (the money in the account that follows the positions profit and loss) falls to 50% of the occupied margin, i.e., when the prepayment ratio on the MT4 platform falls to 50% We recommend that you, as a novice, try out different levers in a demo account to find the most suitable leverage ratio for you Swap interest Swap interest is the interest that needs to be paid or earned on positions held overnight Each currency has its own interest rate, and each foreign exchange transaction involves two currencies and therefore two different interest rates at the same time Generally, if the interest rate on the currency you buy is higher than the interest rate on the currency you sell, you can earn swap interest and vice versa, you need to pay swap interest. Interest, without the need for customers to calculate their own If you need to see the value of the next swap in advance, you can right-click within the quote window on the MT4 platform, select specifications, and view it in the right window: the settlement time of the swap is 5:00 p.m. EST, if a position is opened before 5:00 p.m. EST and closed after 5:00 p.m. EST, then the position will be settled that day The overnight interest 5pm EST in winter time is 6am BST, daylight saving time is 5am BST It should be noted that the overnight interest will be settled on Wednesday for 3 days (may be adjusted in case of holidays) This is because the interest is calculated according to international banking practice in accordance with T+2 delayed liquidation, that is, two bank working days after the start of spot foreign exchange transactions, although called spot, and Not immediate delivery, in fact, is in two working days after the delivery Mondays position is in Wednesday delivery: if the position is held overnight, it needs to be rolled over, the delivery time is pushed from Wednesday to Thursday, so it is one day interest; Tuesdays position is in Thursday delivery: if the position is held overnight, it needs to be rolled over, the delivery time is pushed from Thursday to Friday, so it is one day interest; Wednesdays position is in Friday Delivery: If the position is held overnight, the delivery time is pushed from Friday to Saturday, and because the bank holiday on Saturday, so it is actually pushed to the next Monday, that is, separated by Friday, Saturday and Sunday three days, so it is three days interest The above is the basic concepts you need to understand before doing foreign exchange trading, we recommend that you practice and familiarize yourself with them in the demo account, to lay a solid foundation for future advanced trading foundation