Leverage mechanism and risk in binary options trading

Leveraged Traning

When doing binary options trading, you need to have a proper understanding of leverage. Leverage means “leverage”, and it is possible to conduct many transactions with little capital like the principle of “leverage”. It is called a margin transaction because you trade more than the capital you have. The majority of those who make high profits in binary options trading are actively using this leveraged trading.

As a specific leverage trading mechanism, the ratio is first determined. For example, consider the case where the leverage ratio is set to 20 times. In this case, you can trade 20 times the amount of money called margin. Therefore, if the margin is 10,000 yen, it is possible to trade for 200,000 yen. Since the amount that can be traded is 20 times, the amount of change in your funds will also be 20 times. Therefore, if leverage was not applied at the time of 1% increase, only 100 yen would have been profitable, but by applying 20 times leverage, a profit of 100 x 20 = 2000 yen would be obtained. It is natural that the exchange rate fluctuates by 1%. By leveraging leverage 20 times in a natural exchange rate, you can make a 20% profit.

However, leverage trading also has the disadvantage of increased risk. For example, if the exchange rate drops by 1%, 20% leverage will result in a loss of 20%. Care should be taken because the margin may be exhausted when the market price drops, making it impossible to continue trading.

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