Contract size and leverage question

I was looking at the form to open a demo account and was wondering if someone can explain what this is referring to? What is the difference between the two?

Contract Size & Leverage:https://secure.efxnow.com/NewOLS_FRX...mages/shim.gifhttps://secure.efxnow.com/NewOLS_FRX...mages/shim.gif 200:1 100:1

Thanks in advance!

Broker's leverage (as the ones you mention) refers to the percentage margin required to guarantee an open position.

In the case of 200:1, you need 0,5% of the amount traded.
Example: 1 lot = $100000 margin required $500 (or the equivalent if base currency is not the USD).
At 100:1, the percentage would be 1% = $1000 or equivalent for 1 lot.

True leverage though, is the relationship between your total equity and position size.
Example: if you open a 1 lot position and your equity is $100000, you will be trading at a 1:1 leverage. If your equity is $10000, you will be trading at 10:1 true leverage, etc...

Thanks for the quick reply!

So if I understand you correctly then the higher the leverage (like 200:1) then the less margin required?

On a $10,000 contract (.10) (or one mini lot) the margin would be:

200:1 = $50 ($10,000 x .5%)

100:1 = $100 ($10,000 x 1%)

Is this correct?

Tony

Exactly (or equivalent to base currency value at the moment of opening the position, in the case of non-USD based currency pairs).

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