What Are They ?

One of the main components behind trading Forex is that it is normally undertaken on the basis of margin trading or trading with leverage. The Forex market offers some of the highest leverage (and therefore low margin rates), making it an extremely attractive proposition to traders.

Margin

Margin can be thought as the deposit required to open and maintain positions. This is not a fee or a transaction cost but a portion of your account equity set aside and allocated as a margin deposit. Margin is normally expressed as a percentage of position size (e.g. 2% or 5%).

Leverage

Leverage involves borrowing a certain amount of money needed to gain exposure to a particular market, with a relatively small deposit. Leverage allows you to take a position of much higher value than the monies deposited in your account. It is commonly expressed as a ratio.

How do they work?

Let’s take the following example:

You have a trading account with FX Stream with a balance of $10,000.

If you have an account leverage of 1:1 and wish to use $1,000 on one single transaction as the margin, then you will have exposure of $1,000 in base currency ($1,000) = 1 x $1,000 = $1,000 (trade value). Meanwhile, if you have an account leverage of 100:1 and wish to use the same amount of margin on a single transaction ($1,000), then you will have exposure of $100,000 in base currency ($1,000) = 100 x $1,000 = $100,000 (trade value).

The concept here is that you have been temporarily given the necessary credit to open the transaction that you are interested in making. Without this margin, you would only be able to buy or sell transactions of $1,000 at a time.

Thus, the margin requirements will vary depending on your leverage ratio, or in other terms, a higher leverage equals to a lower margin requirement.

How to check leverage?

At FX Stream, all trading accounts are initially set up with a leverage of 100:1 as a standard and clients have the option of changing the ratio from 1:1 all the way up to 500:1.

To find out the current leverage on your account, simply go to the Client Portal area and your account leverage will be shown next to your login numbers.

How to choose leverage?

Your trading style will greatly dictate your use of leverage and margin.

It is imperative to understand that trading with leverage can affect your trading experience both positively and negatively as both profits and losses are dramatically amplified. Trading with higher leverage ratios may not be suitable for all type of traders and may be too risky for some.

In order to help traders in minimising their risks, we have specific leverage restrictions in place (see table).

To see how much leverage you can use on your trading account, please refer to the information. It is there to guide you on the available leverage options.

Available Leverage Min. Account Equity Max. Account Equity
500:1 $500 $5,000
400:1 $500 $10,000
300:1 $500 $50,000
200:1 $500 $100,000
100:1 $100 $100,000+
50:1 $100 $100,000+
25:1 $100 $100,000+
1:1 $100 $100,000+

How to change leverage?

If you wish to change the leverage ratio on your FX Stream trading account, you can do it easily either by submitting a request through the Client Portal area or emailing us at support@fx-stream.com.

Again, higher leverage ratios may not be suitable for every trading style. If you are looking to trade with higher leverage, please remember: leverage is a double edged sword. Yes, it can assist in opening a larger trade size, but thus amplifies gains and losses.

At FX Stream, clients have the option of choosing their leverage from 1:1 all the way up to 500:1. If you are looking to change the leverage ratio on your account, you can do so by submitting a request from our dedicated Client Portal area . Your margin requirements will vary depending on your leverage ratio.

(*)All FX Stream trading accounts are set up with the standard leverage of 100:1. This is the level that we recommend to our clients as an appropriate level for trading in the FX markets.  By submitting this leverage change request form, you hereby acknowledge that you understand and are aware that increased leverage carries a large amount of risk to your capital and there is a potential you could sustain a loss greater than, and not limited to, the margin you have deposited with us. You also hereby confirm you understand that an increase in trade leverage can result in severe or total account loss. FX Stream is a non-advisory, general advice only broker, and will not provide you with investment or personal advice. For such advice, you must consult a registered financial advisor. Margin Forex is very high risk and leverage should be used wisely. Please note the minimum and maximum account balance required at the various leverage bands. You need to keep in mind that if your trading account balance moves into a new leverage band, your leverage will be changed according to the new leverage bands – we will notify you of this. FX Stream reserves the right to change your leverage at any time at our discretion, with or without notice, and close all open positions if the equity in your trading account falls below the margin required to maintain your open positions.

TOP