Trading with leverage is one thing most traders worship, despite the fact that the higher leverage means higher risks involved in each move you make.
Today, eToro forex broker introduces a new kind of trading where you can simply trade only what you have got, or in other words, all currency pairs available with the broker can be traded with 1x1 leverage.
Now you can lower the risks to just the amount you invest in the trade with no extra risks due to leverage.
Imagine you are trading EUR/USD pair and the rate is 1.1000, so if you invest $1,000 in a long position, you simply buy 909 Euro for $1,000 USD.
The best news is that even with 1x1 leverage the minimum amount for a trading position remains just $25.
What is leverage?
Beginners, listen up! Leverage means borrowed funds. That’s right, there is no magic in it. When you use 1:200 leverage, you borrow money from your forex broker. Do not panic, though, you are not the only one enjoying the perks of it. Leverage is widely used not only in forex but in many other assets that we buy in a day to day life.
So when leverage becomes a problem? The use of leverage can slap you in the face because, while on one hand you can make large gains with it, on the other, you can suffer substantial losses. What makes forex even more attractive is the fact that you get very high leverage for it compared to other investment options.
What makes leverage potentially dangerous is the fact that most beginners have small initial investment amount, so they hope to make a quick cash with the use of leverage, completely undermining the fact that high leverage simply blows up the account within the first year. In other words, leverage will not make you rich quickly.
Let’s take a look at another example of a trade without leverage:
Your total account funds is $10,000. Using the 0.10 lots as a lot size, you are actually buying 10, 000 units of the base currency, meaning that 100 pips would mean only 1% of your account balance, aka $100.
With risk put aside, you can now concentrate on trading instead of constant greed and hide and seek with margin call. It is definitely possible to make pretty great return with smart and slow trading techniques. Think a year, instead of a month and you will be on the right pass to riches.