MarvinKops posted: How to effectively calculate Risk and Reward. formula to use as well as tips to make it easy to understand.
leverage and lot size goes hand in hand higher the leverage lower will be you margin required it means you are dealing in a 1 lot of eur/usd with 30x leverage you will only be needing Leverage is what a trader borrows from the broker. In margin trading, you basically invest a portion of the amount you’re trading and the rest you borrow from the broker. If your leverage ratio is 30:1, it means that with one unit of a currency you can hold 300. So 1 USD will be able to hold 30 USD. So your 30 dollars will only be used and rest is borrowed from the broker The advantage of this is that you will be able to place trades on higher lots and earn big profits and moreover if you’re just a beginner in the trading world this might help avert any kind of major loss so to keep losses in check we opt for higher leverages Trading on a standard lot of usd requires 100,000 usd which is not possible so to make it possible leverage comes in to play Most common lot sizes are Standard 100000 Mini 10000 Micro 1000 Working on higher lots also increases the risk of greater profits if you are just a beginner you must try to trade on micro or mini lots
HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors.
Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance.
You could lose some or all of your initial investment. Do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions.
Any data and information is provided 'as is' solely for informational purposes, and is not intended for trading purposes or advice.
Past performance is not indicative of future results.