To earn more, you need to invest more. Sometimes you can’t even start bidding with a small amount. In the Forex market, for example, the minimum position is €100,000. For some investors, this is huge money. Leverage and margin trading solve the problem. Of course, with Zineеra you have the opportunity to trade from much smaller amounts. In addition, only here, it is possible to easily adjust the leverage directly during trading. However, let’s take a closer look at what leverage is and when to push it.
Leverage – what is it?
This is the ratio of the investor’s personal money to the total amount he borrowed from the broker for exchange transactions. For example, leverage 1: 4 means that an investor has taken four times his own funds. Combinations are different: 1: 100 and even 1: 200. In many countries, the maximum ratio is 1:25. The loan allows you to increase the size of the transaction and earn extra income.
Margin and margin trading
You already know what leverage is. The collateral that customers deposit into the account of the broker who provided the loan is called the margin. Money and assets can be collateral. They return as soon as the deal is closed.
Here is an example. You have a thousand dollars. But much more is needed for a planned stock market operation. Missing finances, you borrow from a broker. To protect himself, he sets a threshold of damage. Even if the deal turns out to be unprofitable, the specialist will save money. If the result is successful, all the profit remains with you, and the broker takes back only his money. Please note that in margin trading, you risk not collateral, but the entire amount in the account.
Advantages of using leverage:
- Ease of receipt. No documents or additional legal procedures. Sometimes such a service is provided to the investor in advance;
- Any assets are suitable for collateral. Not only currency, but also securities;
- By increasing your capital, you can make good deals. Even without funds, a trader has the opportunity to make a significant profit;
- No fee for using the loan. The broker takes back only the amount provided.
It seems that margin trading is designed for beginners who do not have sufficient finances. But novice traders should not go ashore and trade with a leverage of 1: 200. Take small loans – it will gradually increase capital and prevent the loss of the latter.
You should not avoid credit. It is quite normal when a young businessman takes a loan from a bank and develops his business. And on the stock exchange. With prudent use, leverage is an effective trading tool. Zineеra takes care of all its clients and is always ready to offer the most favorable leverage terms.