Another foreign exchange market advance that makes it become an excellent trading instrument is the use of leverage. Many beginning traders don’t fully understand the concept of leverage. Basically, if you have a start up capital of $5,000 and if you trade on a 1:50 margin you can effectively control a capital of $250,000.
It means a two percent move against you and your capital is completely wiped out. If you are a beginning trader you should not use more than 1:20 margin until you get comfortable and profitable and then and only then you can attempt to use higher margins. What does 1:20 margin mean?
That means with your $5,000 you will control a capital of $100,000. Let ’s say you are trading EUR/USD and by using our entry strategy you have decided to enter the trade on a long side. And that you are betting the USD will depreciate against Euro
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