Leverage is the ratio of your investment to your position on the market. This ratio figure is a credit provided by a broker in return for your deposit and will typically stand at somewhere from 30:1 all the way up to 200:1.
For example, your investment could be £1,000, but your market position could be worth up to £50,000. This doesn’t mean you have to take a position of the full £50,000, but the existence of the option is a big appeal to new and experienced traders alike.
This is part of what makes trading on the Forex so popular with traders, but also makes trading based on a high leverage potentially damaging. If you were to trade shares on the other hand, your position on the market would be dependant on your immediately available funds. Whilst it’s true that you can stand to make a huge profit based on a comparatively small investment, the the potential for loss is equally as magnified.
This is why some professional traders will typically trade using a leverage of 10:1 or 30:1. In an effort to reduce risk to their capital, experienced traders reduce the leverage of their trade and in doing so, protect against a loss magnification. Learning when to capitalise on leverage potential is a skill that comes with experience, so the trick is to take your time trading on a smaller leverage until you feel more comfortable with the risks.
After all, leverage is a defining feature of Forex trading, so learning the benefits of trading based on high leverage and your capabilities is going to be well worth your time in the long run.
The bank said in a statement that it had already set aside $400 million for the settlement and would take a $175 million provision in its fourth-quarter results. The company reached a $1 billion settlement with federal regulators earlier this year over some of the issues.
“This agreement underscores our serious commitment to making things right in regard to past issues as we work to build a better bank,” Chief Executive Officer Tim Sloan said in the statement.
