Margin and Leverage are important concepts in currency trading . Since forex prices move very slowly in terms of the actual change in value, the vast majority of traders leverage their accounts to create huge returns in short term trading. In the absence of leverage, it is difficult to generate even a ten percent return in the forex market, which is not the kind of profit that most forex traders have in mind when beginning their careers. Although even unleveraged forex trading can be very lucrative for traders with deep pockets, as retail traders, we will always be in need of some form of leverage to justify the time and energy spent towards perfecting our skills.

Leverage and margin could be a great help for traders. A broker allows a certain ratio of leverage. Typically it is 1:100. Meaning, a broker allows you to buy a lot 100 times greater than your total account balance. This could produce a greater amount of profits for you. However, when you lose a trade, it will amplify to 100 times greater than your total account balance too. This is the point where new traders lose. They are always tempted to the lucrative offers of leverages which make them end up in a losing position. Increasing leverage = increases risk.

The video presented above aims to help individuals understand the nature of leverage and margin. It provides simple yet effective examples and calculations of how an actual Forex leverage and margin work. The video is especially designed for those individuals who are still new to the Forex trading market and aims to educate them via the video tutorial.