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Relationship between leverage ratio and risk
Doing foreign exchange, futures or other margin trading will come into contact with leverage, which means amplification. A small amount of money can control a large amount of funds. Numerically, leverage is equal to the reciprocal of the margin ratio. For example, the margin ratio of Meijing Copper is 5%, so its leverage is 20 times, while the margin ratio of China Shanghai Copper is 12%, and its leverage is about 8.3 times. The leverage of foreign countries is higher than that of China, which is the advantage of the external market. Many people feel high risk as soon as they hear high leverage. In fact, high leverage has nothing to do with high risk. Risk is only related to the proportion and direction of your position. If your position ratio exceeds 50%, it is called a heavy position, so we say that you are at high risk at this time. Because once the market changes in the opposite direction, there will be less room and room for manoeuvre for your account to resist risks, and it is very likely that you will be out. The proportion of positions refers to the proportion of funds occupied by transactions in your account to the total funds, and the unoccupied funds are your room for manoeuvre.

Under the same conditions, the greater the leverage, the smaller the risk!

To compare, we must put it in the same situation, the same amount of money, all 50 thousand yuan, the same number of hands, taking refined copper as an example:

1, the margin ratio is 5%, the leverage is 20 times, and the total capital is 50,000 USD.

Buy 10 lot of refined copper, with an opening margin of $4,750 per lot, occupying a total margin of $47,500, accounting for 94.5% of the positions. You only have room to resist $2,750. A 0.05-point jump in refined copper is $65,438 +02.5, and you can also resist the reverse change of 220 points.

Buy 4 lots of refined copper, the margin ratio is 5%, the position ratio is 38%, and you still have 3 1000 dollars of unoccupied funds, which can resist 2480 points. 2. Margin ratio 15%, leverage 6.6 times, and total capital of 50,000 USD.

Same as above, the first-hand contract value of American National Railway Passenger Transport Company is 25,000 pounds X3.06 (current price) = 76,500 pounds, and the first-hand deposit for opening positions is 76,500 pounds x15% =1475 dollars, which simply can't afford 10 lots, so there is no comparability.

Buy 4 lots of refined copper, the margin ratio is 15%, the opening margin is 1 1475 USD, and the position ratio is 9 1.8%. Only $4 100 does not occupy funds and can only resist 328 points. 20 times the lever can resist 2480 points, and it is clear who has less risk.

Conclusion: 1 Under the same conditions, the greater the leverage, the smaller the risk.

2. Risk is not directly related to leverage. Leverage will only reduce your career security. The risk is related to the proportion of your position. The heavier the position, the higher the risk.