Steps of How to Calculate Leverage in Forex
Leverage is the familiar words that people can understand in the trading world. It is the thing which is related to traders and even brokers. Many traders will need the leverage if their account of money is not enough for make the trading. They need the leverage to fill their money in entry system of trading. Then, how to calculate leverage in forex? Here, we are going to tell you below about the formula of calculating the leverage.
Terms of How To Calculate Leverage In Forex
There are three kinds of words relating to how to calculate the leverage in forex that you need to know. First, leverage is the borrowed money which is provided by the broker. This fund is used to increase the rate of an investment. So, it can help the people to get the big kind of income and profit with only the less and little bit money. They can even increase their rate by borrowing the money from the right broker. Second, margin is the amount of the customer’s deposit when borrow the money from the broker in buying the securities. Margin is the account balance at the first time when opening the account. Third, margin requirement is the percentage which is set by the broker with the leverage.
How to calculate leverage in forex
The leverage in the market of financial is called as the equity ratio. So, people use the formula of equity and debt in how to calculate leverage in forex. The equity is the combination between balance the profit which is get. It means that E = B + P. Then, how to calculate debt? Debt is trade size which is multiply by the base currency per account currency. The formula is D=T x Cb/Ca. then, how to calculate leverage in forex? Leverage is the debt which is divided with the equity. The formula is L= D : E.
Then, how is the right calculation or the ideal amount of leverage for our trading business? It is better to only have 2 percent of leverage from the trading capital. If you have more than that, you might not get the right profit which might satisfy your feel in doing this business. If you have the $10000 in your account, you only have to have the loss for $200 so you will get the ideal profit in trading. The margin level of 400:1, the margin requirement should be 0,25 %. Then, when the based leverage ratio of 200:1, the margin requirement will be 0,50%. The margin leverage ratio of 100:1, the margin requirement should be 1,00 %. The last, the margin leverage level of 50:1, the margin requirement is 2,00%.
So, this is the method to calculate the leverage in forex. People need to know about the debt and the amount of equity to calculate about the leverage in the forex. Then, the ratio formula is also often used by the traders as the view in calculation. Then, people can also count and calculate the margin and pips in the forex.