The elixir of leverage makes it possible to score big gains even in a market that often rises and falls in tiny increments, calibrated in fractions of cents.
“Currencies don’t move that much,” says Drew Niv, chief executive officer of FXCM, the largest OTC forex firm in the U.S. “So if you have no leverage, nobody would trade.”
While leverage can boost gains, it can also magnify losses.
“Leverage is a double-edged sword, of course, as it can significantly increase your losses as well as your gains,” FXCM’s website says. With 50:1 leverage on a currency trade, a 2 percent move against the investor would mean a 100 percent loss.
That’s what could have happened to a trader using 50:1 leverage to bet on a rise in the Japanese yen on
The elixir of leverage makes it possible to score big gains even in a market that often rises and falls in tiny increments, calibrated in fractions of cents.“Currencies don’t move that much,” says Drew Niv, chief executive officer of FXCM, the largest OTC forex firm in the U.S. “So if you have no leverage, nobody would trade.”While leverage can boost gains, it can also magnify losses.“Leverage is a double-edged sword, of course, as it can significantly increase your losses as well as your gains,” FXCM’s website says. With 50:1 leverage on a currency trade, a 2 percent move against the investor would mean a 100 percent loss.That’s what could have happened to a trader using 50:1 leverage to bet on a rise in the Japanese yen on
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