Usages of Leverage
In forex, brokers allow traders to leverage up to 1:100, 1:200, 1:500 and 1:2000. So if you take 1:100 leverage that means you can buy/sell USD 100,000 with just 1,000 margin (your account balance).
In most trading situations, I usually only leverage up 1:200. This means with a USD 1,000 account, we buy/sell up to USD 200,000 per trade. This is all that is required to achieve exceptionally high returns.
Here is some example of Margin required on Leverage
- Leverage 1:10, Margin Required 10%
- Leverage 1:20, Margin Required 5%
- Leverage 1:50, Margin Required 2%
- Leverage 1:100, Margin Required 1%
4 Kinds of Forex Trader
- Scalpers: Scalpers buy or sell in 1 or 2 minutes and their target 5 – 10 pip per trade. Scalpers normally trades based on high news effect. E.g Labor rate, GDP, Inflation, Interest rates etc. They strictly follow M1 (1 minute) and M5 (5 minutes) charts in MT4 platform.
- Position Traders: Position traders enter for the forex positions and hold it for couple of weeks and months as because they have long term view. Normally these people trade based on fundamental underlying help of economy, movements of interest and GDP, look at the overall big trend. Position traders target 500 – 1000 pips per trade and they follow D1 (Daily Candle) and W1 (Weekly Candle) charts in MT4 platform.
- Swing Traders: Swing Traders typically target 50 – 150 pips per trade. Their trade duration is less than a week. Normally they follow H1 (1 hour) and H4 (4 hour) charts in MT4 platform.
- Day Traders: Day traders buy or sell over the day and they rarely pass over the trade next day. Normally they trade 2, 3 trades a day. Their target 20 – 40 pips per trade. Normally Day traders follow M15 (15 minutes), H1 (1 hour) and H4 (4 hour) charts in MT4 platform.
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