Leverage is one of those common errors in forex because it is different than for stocks.
In forex the trade size is set by the lots size. For a standard account that is $100,000 per lot, or 100,000 pounds or yen, it doesn't matter but it is 100,000 to 1 lot. (Mini accounts are 10,000 to 1) This is the real leverage but that isn't the leverage that is talked about in forex.
The margin is set by the leverage. The marginal reserve is money that is automatically held back that you can't use to trade with or even protect open trades. How much is held back is determined by the account leverage. Divide the 100,000 by the leverage, let's say 200:1 so 100,000/200 = 500. So for every 1 lot you have open, there is $500 in your account that you can't touch.
Now if you are stuck with 50:1 as in the US, $100,000/50 = $2000 Ouch. You have to put an extra 2 grand in an account to protect the broker in case you lose more than you have in your account. With today's computers, the likelihood of that happening is very low but that is what it is for.
That $2000 would protect a one lot trade for 200 pips. But if you want to protect the trade, you have to put another $2000 in the account. This make your percentage of return drop and you are losing money because of stupid regulations. It in no way helps the trader to have a low leverage, it hurts him. Only in forex.
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