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Examples of leverage in Forex trading


Example 1: Trading the currency pair Euro and Dollar with a leverage of 20:1

With quite a few brokers, it is the case that different levers are made available, so that the customer can decide with which leverage he wants to trade. Among the relatively low levers, for example, is a leverage of 20:1, which we use as a basis in the following example:

Trade: Dollar against Euro
Volume: 10,000 dollars
Leverage: 20:1
Minimum margin: 500 Euro (own capital investment)
Increase of the dollar exchange rate within two days: three percent
Return related to own capital investment: 60 percent
Profit: 300 Euro

In this example, you have achieved a return of 60 percent with a capital investment of 500 euros with Exness swap free within just two days and thus realized a profit of 300 euros. This profit is still comparatively low, because with a much higher leverage your profit would have been much higher.

trading without swap

Example 2: Trading crude oil CFDs with a leverage of 100:1

Trade: Crude Oil CFDs
Volume: 45.000 Euro
Leverage: 100:1
Margin (own capital investment): 450 Euro
Price increase oil within 14 days: eight percent
Return related to own capital: 800 percent
Profit in Euro: 3,600 Euro

In this case, the own capital investment is 450 euros and is therefore almost identical to the margin from the first example. However, in this case, if the oil price increases by eight percent, you will make a significantly higher profit, which is due to the much higher leverage of 100:1 (compared to example 1). Thus, in this example you achieve a profit of around 3,600 euros, although you have only invested 450 euros of your own capital.

Example 3: Trading DAX CFDs with a leverage of 400:1

This example is intended to illustrate why CFD trading is also so attractive for small investors and speculators who simply want to try out CFD trading. In this case, the capital investment is only 50 euros, but still comes out at the end of a realistic and very high profit.

Trade: DAX CFDs
Volume: 20.000 Euro
Leverage: 400:1
Margin (own capital investment): 50 Euro
Percentage increase DAX within five hours: two percent
percentage return related to equity: 800 percent
profit in Euro: 400 Euro

This example is typical for the fact that in CFD trading disproportionately high profits can be achieved even with a very small margin. Responsible for this is of course primarily the enormously high leverage of 400:1, which is however not unrealistic in practice.

For example, if you trade with a leverage of 200:1, only a minimum margin of 0.5 percent would actually be required. Nevertheless, you should maintain a significantly higher margin of, for example, five percent, because then you can also cope with larger price declines in the meantime in the sense that the position is not automatically closed. For brokers with margin calls, it is even more dangerous, because then the losses could be greater than your actual capital investment. Therefore, in such cases and especially with higher leverage, it is definitely recommended to always act with a stop-loss order to limit losses. Therefore, we recommend especially beginners to choose a broker without margin call when trading Forex and CFDs to avoid this risk from the beginning.