Foreign exchange transaction is the exchange of one country's currency with another. Different from other financial markets, the foreign exchange market has no specific location and no central exchange, but transactions between banks, enterprises and individuals through electronic networks.

Many times we are not familiar with how leverage works. Does leverage make my profit or loss bigger? In fact, leverage only allows our funds to be small and big. 1: 20 lever, 1: 100 lever and 1: 400 lever. What's the difference? Is the lever good or small?

Function of lever

In essence, engaging in foreign exchange leveraged trading or foreign exchange margin trading (the same product is different) is to engage in buying and selling contracts.

Take the euro as an example. The euro/dollar is 1. 1820, which means that 1 euro can be converted into 1. 1820. When the euro fluctuates from 1. 1820 to 1. 182 1 or 1. 18 19, the fluctuation is 0.000/.

Second, it is basically the same internationally: 1 standard contract value100000 USD (100000 USD), and mini contract value100000 USD (100000 USD). What is the value of a point? 100000 USD X0.000 1= 10 USD, 10000 USD x 0.000/kloc-0 USD. Therefore, whether for 1: 20 lever, 1: 100 lever or 1: 400 lever, the profit and loss of 1 point of 1 standard contract is 10 USD and/kloc.

Third, 65438+ million dollars /20 times =5000 dollars, 65438+ million times 1 00 times = 1000 dollars, 65438+ million times /400 times =250 dollars, that is to say,1standard contract. If the leverage is 1: 100, you need to use your account funds 1000 USD; If the leverage is 1: 400 USD, you need to use your account fund of 250 USD. So how much money is still active in your account? How much risk can you resist?

For example, if the account fund is $6,000, you buy 1 Euro/USD, for example (one point is1USD):

Leverage 1: 20 times: 5,000 USD is occupied, and there is 1000 USD in the account, which can resist the risk of 100. When the market price fluctuates upward and loses 100 points, the system will force the liquidation. (extremely risky)

1: 100 times leverage: it occupies 1000 USD, and the account still has 5,000 USD, which can resist the risk of 500 points. When the market price fluctuates upwards and loses 500 points, the deposit will be recovered and the system will force you to close your position. (general risk)

1: 400 times leverage: it takes up $250 and the account has $5,750, which can resist the risk of 575 points. When the market price fluctuates upwards and loses 575 points, the deposit will be recovered and the system will force you to close your position. (Leverage with risks less than 1: 20 and 1: 100 times. )

Finally, it can be concluded that the higher the leverage ratio, the smaller the risk, when the account funds are the same and the number of lots is the same (1 contract is called 1 lot).