You need to know that Forex for Forex Traders Leverage is very important in determining the transaction ( Forex trading ) that you do. Forex leverage can allow you traded funds amount far greater than the funds you deposited , because Leverage is a loan granted to Broker Forex Trader , so as to have the ability or the great purchasing power. Generally, the amount of leverage provided is 1:50, 1:100 , 1:200 , 1:400 or 1:500 , and there are up to 1:1000.
For example, if you make a deposit of U.S. $ 100 with a leverage of 1:100, then you have the ability to trade at U.S. $ 10,000 ( U.S. $ 100 x 100 ) or with the same 100 x folding . In this case also relates to guarantees given to Broker ( Margin ) every time you open a position. The size of the margin is influenced by the amount of leverage and Volume ( Lot ) is opened by you . So with 1:100 Leverage Broker guarantees given to : 1/100 x 100 % = 1 % , Leverage 1:200 = 1/200 x 100 % = 0.2 % , Leverage 1 : 500 = 1/500 x 100 % = 0.5 %.
Margin calculation formula is: Leverage x Volume ( Lot ) x Contract Size , so if the transaction with 1:100 Leverage 1 Lot EUR / USD at 1.3350 , the margin required = 1/100 x 1 Lot x ( 100.000x1.3350 ) = U.S. $ 1,335 ( 1 standard Lot = 100,000 ) , meaning here needed funds U.S. $ 1,335 to trade 1 Lot EUR / USD on a leverage of 1:100 . If you deposited funds only U.S. $ 100 obviously this is not sufficient to carry out the transaction.
The conclusion is, that on the one hand Leverage Forex can make you trading with small capital and can achieve a large profit, on the other hand can bring large losses if you are not wise in its use. To learn more about Leverage you can learn through a variety of Forex Website.