The use of leverage is more the convenience of the trader himself because the use of leverage is closely related to money management. Traders who are used to using large lots on a single transaction will prefer to use high leverage of between 1: 1000 and 1: 3000. Meanwhile, traders with full calculation and caution will usually choose to use small leverage, between 1: 100 to 1: 500. In the meantime, before we discuss more Leverage, you can visit http://www.arabforex.pro/en/uae/ if you need a trustworthy broker in UAE.
There is one more term about leverage in forex trading, that is real leverage. It’s easy enough for us to find out real leverage. Understanding real leverage in forex trading is much more important than margin leverage (explained leverage previously). That is by dividing the total transaction value of open positions owned by the total capital owned for trading in the UAE forex market.
This is an illustration of leverage that you can check out:
Suppose we have capital in a trading account of $ 10,000. At that time, we open a position of 1 standard lot which is worth $ 100,000.
In this condition, it means that we are making transactions with leverage 10 times greater than our capital (100,000 divided by 10,000).
If we open a position of 2 standard lots (worth $ 200,000), then the leverage is 20 times greater than our capital.
In forex trading, UAE forex traders constantly monitor price movements in pips. A one pip movement is the 5th or 3rd decimal move of the price being monitored.
However, that pip movement was worth only a fraction of a cent. This depends on the currency pair or forex strategy applied.
As an illustration, if we look at the price movement on EUR / USD from 1.13000 to 1.14000 (as far as 1000 pips), the price only moved by 1 cent.
That is why to get “faster” profits, we have to make transactions in large numbers so that the movement of each pip can have a significant effect.
We cannot determine the margin leverage because the UAE forex market already determines the amount. What can be managed freely is the real leverage, where we can adjust it based on our trading style and trading plan.