IC Markets is a reputable forex broker that offers leverage trading on a variety of assets. Leverage trading allows traders to control larger positions with a smaller amount of capital, which can lead to greater potential profits. However, it also increases risk, as traders can also experience greater losses.
One benefit of leverage trading is the ability to enter trades with a smaller amount of capital. This can allow traders to potentially make larger returns on their investment. Additionally, leverage trading can also enable traders to take advantage of smaller price movements in the market.
An example of trading leverage with a ratio of 1:500 would be if a trader deposited $1,000 into their account and wanted to trade a position worth $500,000. With a leverage ratio of 1:500, the trader would be able to do so, effectively controlling a position 50 times larger than their actual account balance.
However, it’s important to note that leverage is a double-edge sword and can amplify both gains and losses. So, it’s crucial for traders to have a well-defined risk management strategy and also to be aware of the leverage offered by their broker, and to only trade with money that they can afford to lose.
Trading example of 1:500
A winning trade with 1:500 leverage would be a scenario where a trader is able to successfully predict the price movement of an asset and make a profit as a result.
For example, let’s say a trader has a $1,000 account and wants to trade with a leverage ratio of 1:500. They decide to buy 1 standard lot (100,000 units) of the EUR/USD currency pair at a rate of 1.2000. The value of the trade is $120,000 (100,000 units x 1.2000).
The price of the EUR/USD then rises to 1.2100, and the trader decides to close the position. The profit on the trade is $100 (1.2100 – 1.2000) x 100,000 = $1,000.
Despite the small account size, the trader has made a 100% profit on the trade due to the leverage of 1:500.
Get $100 bonus or 30% discount forever with IC Markets here: