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Leverage in a Base Currency
Forex Club offers the following leverage:
- 100:1 for accounts from $10 to $100,000
- 50:1 for accounts from $100,000 to 200,000
- 20:1 for accounts over $200,000
- Minimum trade size is 1,000 which is equivalent to $10 traded with the maximum leverage ($10x100=1,000).
Leverage in the base currency
- Simpler and more convenient calculation.
- While the cost of pip equals in both examples, margin requirement does not.
- Margin requirement is not influenced by currency fluctuations.
- No need to worry about funding your account in a certain currency with which you plan to trade.
- Actual maximum leverage may be more than 100:1, when a base currency has a greater value than the US dollar.
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Traditional way - leverage in US
dollars
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Forex Club way - Leverage in a base
currency
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Common way to calculate leverage is to calculate in some
currency, usually US dollar. Most brokers offer leverage of 100:1
in US dollars. Maximum trade size is then calculated as amount in
USD x 100. Suppose you decide to purchase 100,000 GBP/USD
($10 per pip). What will be the necessary margin requirement
for this trade? To figure this out we need to take current quote
for GBP/USD (lets say 2.0285) and do the following:
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When you are trading with leverage in a base currency there is
a simple rule that you need to remember. When leveraged, each
dollar on your deposit = 100 units of any other currency. So if you
decide to purchase 100,000 GBP/USD at a rate of 2.0285 you need to
have $1,000 on your deposit. By the same token, with $5,000 on your
deposit you can purchase 500,000 GBP/USD or 500,000 EUR/USD, or
250,000 GBP/USD and 250,000EUR/USD simultaneously.
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(2.0285 *100,000)/100 = $2028.50 |
Just divide trade size by 100 |
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$2028.50 |
$1,000 |
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| is the amount you need to have on your deposit to purchase 100,000 GBP/USD, when cost of a pip is $10 and when current GBP/USD=2.0285 | is the amount you need to have on a deposit to purchase 100,000 GBP/USD, when the cost of a pip is $10 and when current GBP/USD=2.0285 | |
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