Can any of you explain for me about the meaning of "leverage trading" in forex trade? Thank you very much!?
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This entry was posted on Thursday, April 23rd, 2009 at 6:59 am and is filed under forex trading. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
April 23rd, 2009 at 6:59 am
"Leverage" is when a person uses borrowed money to make trades, in order to magnify their returns, for good or ill, depending on how the trade goes. Many brokerages will lend you money to trade with. Leverage is similar to "margin."
April 23rd, 2009 at 6:59 am
leveraging is when you borrow money at a fixed interest rate and you then invest the borrowed money in the hope that your money grows faster then the interest rate on your borrowed money. if your investment does grow faster you can pay back the borrowed money and keep the profits you made off the investment. in other words you can make money from investing other peoples money. this could backfire because if your investment falters you still need to pay back the borrowed money. this is why the derivatives and the credit default swaps caused the housing market to fail. the derivatives are comprised of these high risk investments. foreign exchange leveraging is just leveraging used in the market for currency.
April 23rd, 2009 at 6:59 am
There seems to be a misunderstanding that "leverage" and "margin" are technically special ways of investing.
This is not the case. You a merely borrowing the difference between the purchase price and your down-payment. The difference between getting your loan from a broker and a loan shark is that your broker will protect himself and you by selling your stock when it looks like a likely loser.
April 23rd, 2009 at 6:59 am
Leverage is simply borrowing money in an asset, just like buying a house by taking out a loan in it.
Be careful with leveraging to much because you will not be able to meet margin payments,