Trading with leverage, also known as margin trading, is a strategy that allows to make transactions in the cases when the price highly exceeds trader`s total funds. Thus the trader invests only a small percentage of funds in a deal. The exact percentage depends on many factors like a broker, platform and asset. Nowadays the margin trading is very popular. A leverage usually means the ratio of trader`s personal funds to the total amount, while a margin is the same ratio expressed as a percentage.
The popularity of a leveraged trading is due to its countless benefits:
Imagine that the current price for a troy ounce of gold is 1327$. Let`s assume, we`ve made a forecast of highest costs for gold and opened a big deal of 10 items. Thus, the total deal amount will be 13 270$. It is too dangerous to risk the sum, moreover, a few traders have got this money. WANT. BROKER provides a leverage 1:100 (1% margin) for these positions. It means that you have to invest only 1$ for 400$ of this deal and, using the leverage, the total transaction value will be only 132,70$.