From the leverage meaning, you can be able to understand its strength. To use leverage can be beneficial in several ways. First, it might help you in maximizing profits per trade. As a leverage trader with resources which are limited, you can trade in assets which are expensive like gold, bitcoin, and platinum. Without having leverage, it could not be something viable for a trader who has an account of $1000 to trade in gold which goes for about $1200.

The leverage size which a trader utilizes is quite important to determine the success. When the trades go well, a trader who is highly leveraged can end up making more money as compared to a trader who has a lower leverage.

An example is where you have in your account $1000 and you decide that you are selling the USD/JPY pair that is trading at 110. Your account has 50 leverage and the broker is requiring you to have a margin deposit of about 1%. Assume that the standard lot is about $5.

In the above trade, you will be selling short worth $50000 of the USD/JPY. To use the above assumption, in case the USD/JPY pairs go lower by 100 pips, then your profit will be at $2500.

Mackenzie Joey

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