Leverage is a way for a trader to trade much bigger volumes than he would, using only his own limited amount of trading capital.
Leverage multiplies traders’ buying power, allowing investors to control a larger investment than their capital, potentially increasing their returns while only investing a percentage of the overall value of the asset in question.
How it works?
The equity or capital is basically the cash you deposit into your trading account. This is the formula:
Financial Leverage = Total Assets / Equity = (Equity + Debt) / Equity
Here’s how different degrees of leverage affect your exposure (and thus profit potential and maximum loss) for an initial investment of €1000:
*using excessive leverage can have a negative impact on your positions.
Which markets can you use leverage on?
Some of the markets you can trade using leverage are:
An index is a numerical representation of the performance of a group of assets from a particular exchange, area, region or sector. As indices are not physical assets, they can only be traded via products that mirror their price movements – including CFD trading and ETFs.
Foreign exchange, or forex, is the buying and selling of currencies with the aim of making a profit. It is the most-traded financial market in the world. The relatively small movements involved in forex trading mean that many choose to trade using leverage.
A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. Traditional examples of commodities include grains, gold, beef, oil, and natural gas. For investors, commodities can be an important way to diversify their portfolios beyond traditional securities.
The leverage available to you may vary depending on your Jurisdiction, please refer to StreamsFX Legal Document Leverage Policy for details.