What is leverage in Forex factory?

Leverage means the % of money which you can borrow from your broker when you open a trade. Suppose your balance is $ 100. If you use the leverage 1: 200, your broker will give you $ 200 loan. So, you can trade 10 x 200 = $ 2000 by $ 10. But it depends on you that how much loan you will take.

People think, “Wow!! If I get 200 x loans, why shouldn't I take? Stock markets don’t want to give 1: 2 loans. This is better.”

Suppose your deposit is $10. You want to use leverage 1: 1. Means, you don’t want any loan. Then your broker will allow you to open trade within $ 10. In that case, you will get profit of $ 1 or 2. Usually different currency pair moves 100 – 300 pips per day.

Then you thought of taking loan and opening bigger trade. If any broker offers you 1: 200 leverage, you can trade $ 2000 by $ 10 . So, you made profit  $ 1 or 2 before but you can now make profit profit  $ 100 or 200 per day. On the same way you may loss $ 100 or 200 per day.

The broker will give you loan but it has a few limitations. At the time of loss if the amount is equal to your capital, the trade will be closed automatically  The broker will not let you trade in loss mode more than your capital. This is called “ Forex Margin Call”.