This is the concept of margin in foreign exchange trading. The trading leverage is high, indicating that the margin has been greatly enlarged. If the trading leverage is 1: 10, it means that the capital has been enlarged by 10 times. To put it simply, in the course of trading, banks provide a considerable proportion of loans to customers, and users only use very little money to avoid risks, while real transactions are carried out through bank loans.

With a small amount of money, invest several times the original amount. In order to expect to get a rate of return that fluctuates several times relative to the investment target, or lose money. Because the increase or decrease of margin (small funds) does not move according to the fluctuation ratio of the underlying assets, it is very risky.

Extended data:

If you want to make money from the futures market, such as the foreign exchange market, you must first have rich and solid financial knowledge and skilled trading techniques, so as to make money from it!

Foreign exchange margin trading adopts leverage principle, and traders can make use of the characteristics of capital amplification to quickly accumulate wealth through correct trading methods. This wealth-enlarged trading method is being accepted by more and more foreign exchange investors.

For example, if an investor wants to buy N lots of euros somewhere between the euro and the dollar, if his signing multiple is 20 times, then the calculation method of the deposit he uses is:

Margin =N× contract amount per lot multiplied by or divided by opening price (then exchange rate )× 5%. Specifically, if someone wants to buy 5 lots of euros at the position of Euro/USD 1.4500, the deposit used is:

5× 100000 (EUR )×1.4500× 5% = 36250 (USD)

If the euro rises to 1.4600 against the US dollar in the next period of time, then the player's profit is:

Profit =5× 100000 (EUR )× (1.4600-1.4500) = 5000 (USD).

In terms of profit ratio, if a trader buys Euros at 1.45 with $725,000, when it rises to 1.46, he can make a profit of 5,000 yuan, that is, 0.69%, while the profit of margin trading is 5000-36250×100% = 65433.

In practice, after buying a currency, it is not necessarily profitable that day. If the position is not closed before 2 am the next day, interest income or expenditure will be calculated for the currency in its trading account, and the interest rate will be based on the international interbank offered rate (starting from 360 days).

Baidu Encyclopedia-Leveraged Trading