This article looks at the margins and leverage that you get with Singapore forex brokers.
There are two concepts that all forex traders should know about and they are margin and leverage. These are two aspects of trading that you are able to get from the Singapore forex brokers. It is important that you understand what these are and how they affect the trading that you are able to complete. You should also consider what the relationship between the margin and the leverage that Singapore forex brokers offer.
What is Margin and Leverage from Singapore Forex Brokers?
The first point that you need to consider is what the margin and leverage that you get from Singapore forex brokers actually is. The margin that you get from the broker is the loan that you are offered. This loan is what you are going to be using for the leverage that you get. The leverage is the amount that you are able to increase your trade value by. Singapore forex brokers do not have any restrictions on the amount of leverage that they are able to offer. This means that your broker could offer you 20:1 leverage or 500:1 leverage.
The Relationship between the Margin and Leverage
The relationship between the margin and leverage is actually very easy to determine. The margin is the loan that you get from the broker with your trading account as collateral. You will then use the margin as leverage. This means that the loan you get from the broker is what you use to trade instead of the amount from you trading account.
Who Should Use Leverage?
A common question that many people have is who should be using leverage. Leverage is something that you have to be very careful with. If you do not use leverage correctly you could deplete your trading account. This is due to the fact that you are using your trading account balance as the basis for the margin you are getting.
Ideally, you should leave leveraged trading to the experienced traders. These traders should have a better understanding on the market and this should result in them understanding the risks better. You should also leave the use of leverage to the traders who have large amounts of capital. The more capital you have the lower the risks of leverage actually are because of the buffer that your capital creates.
Trading Strategies with the Margin and Leverage
There are a number of trading strategies that you will find that trade with leverage and the margin. You need to be careful if you consider the use of these trading strategies. These strategies are generally high risk and they could lead to major losses. There are also a number of forex brokers that do not allow you to use forex strategies that trade within the margin.
This is an advanced trading strategy and new traders should not look into this. When you trade within the margin you can easily lose everything that you have in your trading account. There are many traders who have lost everything when they use this kind of trading because of the risks that are involved.