Noob Question about leverage | Forex Factory

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Noob Question about leverage

  • #1
  • First Post: Apr 13, 2012 11:13pm Apr 13, 2012 11:13pm
I'm a little confused about leverage calculation in relation to position sizing.

Let's say I have 2 accounts with 10,000USD in both of them.

In the first account, I'm on 1:1 leverage. So that means I can only trade exactly 10,000USD worth of contract right, meaning only a mini lot?

In the second account, I'm on 1:50. So 50 x 10,000 is 500,000. That means 5 standard lots.

Am I on the right track here?

Another question, if I were to risk 3% on 50 pips with EURUSD. That means on both account, I can only trade 6 mini lots?
  • #2
  • Apr 14, 2012 1:45am Apr 14, 2012 1:45am
Quoting jayjb

I'm a little confused about leverage calculation in relation to position sizing.

Let's say I have 2 accounts with 10,000USD in both of them.

In the first account, I'm on 1:1 leverage. So that means I can only trade exactly 10,000USD worth of contract right, meaning only a mini lot?

In the second account, I'm on 1:50. So 50 x 10,000 is 500,000. That means 5 standard lots.

Am I on the right track here?
In theory, yes, but in the leveraged account you need to consider brøker margin requirements and their margin call policy, but you're right as far as the math goes, theoretically you could open a 500k position.


Quoting jayjb

Another question, if I were to risk 3% on 50 pips with EURUSD. That means on both account, I can only trade 6 mini lots?
Correct again, 60k trade size would be $6 per pip x 50 pips equals $300, 3% of $10k. On the (first) unleveraged 10k account you obviously wouldn't be able to open a 60k trade but I'm sure you realized that already!
  • #3
  • Last Post: Apr 14, 2012 8:09pm Apr 14, 2012 8:09pm
Quoting jayjb
In the second account, I'm on 1:50. So 50 x 10,000 is 500,000. That means 5 standard lots.
1:50 leverage is equal to 2% margin (1/50). This means that if you want to trade 1 lot of any USDXXX, worth 100,000 USD, you only need to put up 2000 USD per lot. So yes, 5 standard lots = 10,000.

Note that per lot, EURUSD is worth a bit more per lot..

And yes, %risk depends on lot size and stoploss.
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