Leveraged trading is also called virtual trading and deposit trading. That is, investors use their own funds as a guarantee to enlarge the financing provided by banks or brokers for foreign exchange transactions, that is, to enlarge the trading funds of investors. The financing ratio is generally determined by banks or brokers. The greater the financing ratio, the less money customers need to pay.
The international financing multiple or leverage ratio is between 20 times and 400 times. The standard contract in the foreign exchange market is 6,543,800 yuan per lot (referring to the base currency, that is, the previous currency of the currency pair). If the leverage ratio provided by the broker is 20 times, then the buyer and the seller need a deposit of 5,000 yuan (if the currency of the transaction is different from the currency of the account deposit, it needs to be converted). If the leverage ratio is 100 times, the buyer and the seller need a deposit of 1000 yuan. The reason why banks or securities firms dare to provide a larger financing ratio is because the daily average fluctuation of the foreign exchange market is very small, only about 1%, and the foreign exchange market is a continuous transaction. Coupled with perfect technical means, banks or brokers can completely resist market fluctuations with less margin from investors without taking risks themselves. Foreign exchange margin is a spot transaction, which has some characteristics of futures trading, such as buying and selling contracts, providing financing, etc., but its position can be held for a long time until voluntary or compulsory liquidation.