Leverage is one of the most important concepts in the world of forex trading, but for novice traders it can be difficult to comprehend what it means and how it functions.
The concept of leverage in trading forex is basically borrowing money from the broker in order to allow traders to increase the amount of positions compared to the balance of your bank account. It is a great forex and trading instrument at any level, but especially in the case of an economy as it is typically required at least $1000 to open an account with a foreign exchange broker.
Trades with high leverage: Three things to take into consideration
If you are trading forex or any other type of trading that involves high leverage, there are some important aspects to be aware of:
1. Margin calls are an ordinary occurrence
Particularly for smaller levels of funds any small shift in the value of your investment could cause an order to cancel your margin. This can happen in the event that you don’t have enough funds to offset the loss incurred through leveraged trading. The broker might ask you to deposit an additional amount or else your position could be closed automatically. The greater leverage you have here, the more prone your position is to movements.
2. The volatility increases the risk associated with trading high leverage
Like we said, even tiny fluctuations in the value of an asset could be multiplied very quickly when you are operating in a high-leverage. The market’s volatility could ruin your bank account quickly in certain instances, therefore it’s worth trying to invest in assets that are more stable and ensuring you set an annual stop loss.
3. The importance of risk management
In the end, it’s clear that trading at a higher leverage comes with more risk that only increases as leverage grows. Even the most professional traders and funds are susceptible to being wiped out due to a market volatility that results in the possibility of a margin call. This is why your strategies for managing your risk such as making an appropriate limit loss and a take profit threshold are crucial. Making use of an online Demo account to get a better understanding of trading before putting money on the line is a smart step.
What is the maximum leverage offered by regulation?
The leverage you get in forex trading is dependent on the broker, but as well on the law that you trade under, the jurisdiction you’re in trading from, and also the asset itself. The majority of brokers that are regulated have high leverage limit it to about 50:1 which is the norm under the IIROC in Canada for instance.
Which is the most effective leverage to trade?
Usually 100:1 leverage is considered to be the highest level that will give you the ability to choose from a range of trading strategies, however there is no optimal level that is suitable for all traders. The ideal leverage depends on your personal situation, your experience and your attitude towards risk. Certain traders may prefer to make use of no leverage whatsoever, but if you’ve had experience it could be an excellent option to fully utilize trading strategies that require minimal capital requirements. If you’re new to trading, then one of the most effective places you will find our information about the top brokers for newcomers. In addition you must also use demo accounts provided by high leverage forex brokers. FBS also provides the lowest deposit amount if you choose to begin investing with actual money.
During this procedure in addition you’ll have to take into consideration the minimum deposit requirements for the broker and deposit methods they offer. In the end you’ll be looking for the broker with minimum deposit requirements that is within your budget, and deposit methods that are convenient for you to transfer cash into your bank account.
In this regard that’s the goal, we’ll examine the various deposit options which IC Markets provides along with the minimal deposit requirement.
What is IC Markets Minimum Deposit?
IC Markets offers three different types of accounts. They are:
- Raw Spread (cTrader).
- Raw Spread (MetaTrader).
- Standard (MetaTrader).
The IC Markets Minimum Deposit across all its accounts is $200 or the equivalent in the trader’s local currency. So, the Raw Spread and IC Markets Standard Account minimum deposit is the same.
Brokers that offer high leverage for forex are just as beneficial for traders as the other categories. Many traders like the leverage, as well as the minimum deposit requirement. It is simple to test the brokerage house in live trading conditions and determine whether it’s the right option for a long-term partnership. Forex brokers with high leverage generally provide incredible execution and market conditions that are suitable for all types of traders. The only thing traders have to do is select the appropriate trading account and alter the way they manage their money in order to mitigate the risk associated when trading high leverage. To summarize the main benefit that high leverage brokers have is the ability for traders to maximize their capital.