Leverage question

Can someone please help me understand this?

I have a mini account at 200:1
If I have a max of 6 positions open of .1 lot each, what leverage am I trading at?

The smartass answer is that you are trading 200:1. I'm guessing you didn't mean this as a trick question so I'm assuming you want to know how much margin you've used.

On a mini account at 100:1 you set aside $100. At 200:1 you are setting aside $50/contract x 6 mini lots = $300. You can divide $300 by your account value to determine the actual fractional margin you've used. For me, it usually comes out to around 7:1 - 10:1.

By the way, welcome to Forex Factory.

So 6 mini lots is $300. And if I have a 3,000 account, then that means I'm trading at 10:1, is that right?

Yes, there are different kinds of margin but I hope this is what you were asking. As a rule of thumb, 1 mini per $1000 is very responsible when it comes to position sizing.

There is no such thing as "I am trading at 100:1" leverage, for instance. It is more like "I am trading an account set at 100:1 leverage with this many total lots"

Leverage is just the opposite of margin. Margin just dictates how many lots you can have open at a time.

I guess the confusion is caused because some people say "high leverage is crazy"... but it really depends what you do with it. But they also might say that because all high leverage brokers are not ECNs... and maybe they like ECNs (or Oanda which only offers low leverage accounts 50:1 or lower)

But the other thing is that if you are trading lower leverage, you are more insulated from a catastrophe because you will get a margin call sooner than if you had 400:1 leverage. So there would be more money left in your account after the call.

Margin can be calculated depending on the currency pair's value (google will find you many examples), or like FXCM style which is the same $ value for margin regardless of currency pair. Which way depends on the broker.

But you can be "fully leveraged" or "over leveraged" which is dangerous. Over leveraged means that you are trading with too large lot sizes for your style of trading.

Hi Mac, and welcome to the Factory.

For a detailed explanation of broker leverage, true leverage and margin requirements along with how all three tie together, please read the money management sticky here in the beginner's forum. There are 23 posts. Work your way through all of them and you'll have a better understanding of these topics than many other traders.

Here's the link for your convenience.

http://www.forexfactory.com/forexfor...ead.php?t=3690

Dial