One of the ways for the banks (or other large financial institution) to make money is to exchange large amounts of one currency into another and then change it back. For example, EUR vs USD is traded at 1.13457.
A bank has 1,000,000 EUR and sells it at 1.13457 USD per each (gets 1,134,570 USD).
After a while EUR vs USD is traded at 1.13420, so, the bank takes 1,134,570 USD and exchanges them into EUR (and gets 1,000,326.22).
Bank's profit here is EUR 326.22(=1,000,326.22-1,000,000).
Usual mortals (retail clients) don't have millions to do the same, so margin trading was introduced, when a user doesn't have to actually HAVE a million to exchange it, he can have a small fraction of it (can be less than 1% of that million).
Leverage and margin requirements
This "fraction" is used as a certain collateral and is the necessary minimum to start trading with this particular volume (1 mln in our example). Also it's known as "margin requirements".
In case margin requirements are 1% - it means we need to have only 1% of the volume we want to deal with in our balance.
1% is 1/100, so, "100" here is called "leverage".
The wording is: leverage of 1:100.
Weltrade’s leverages
We provide our clients with an opportunity to trade hundreds of various assets. As they are different - we provide different leverages for them. For some of them the leverage is so high that the maximum volume of the trade that you want to open can be up to 5000 more than what you have in your balance (you can see it yourself here).
Nevertheless, as trading with high volumes is risky and can lead to significant losses, for some groups of instruments leverage depends on the total volume of your open positions. Here are the details:
FX Majors and Metals |
|
Trading volume, USD | Leverage |
0 - 3,000,000 | 1:1000 |
3,000,000 - 3,500,000 | 1:500 |
3,500,00 - 4,500,000 | 1:200 |
4,000,000 - 5,000,000 | 1:100 |
5,000,000+ | 1:25 |
Minors |
|
Trading volume, USD | Leverage |
0 - 1,000,000 | 1:1000 |
1,000,000 - 1,500,000 | 1:500 |
1,500,000 - 2,000,000 | 1:200 |
2,000,000 - 3,000,000 | 1:100 |
3,000,000+ | 1:25 |
Crypto |
|
Trading volume, USD | Leverage |
0 - 250,000 | 1:100 |
250,000 - 1,000,000 | 1:50 |
1,000,000 - 2,000,000 | 1:25 |
2,000,000+ | 1:10 |
Indices |
|
Trading volume, USD | Leverage |
0 - 3,000,000 | 1:500 |
3,000,000 - 3,500,000 | 1:200 |
3,500,000 - 4,000,000 | 1:100 |
4,000,000 - 5,000,000 | 1:50 |
5,000,000+ | 1:25 |
| |
Trading volume, USD | Leverage |
0 - 1,000,000 | 1:500 |
1,000,000 - 1,500,000 | 1:200 |
1,500,000 - 2,000,000 | 1:100 |
2,000,000 - 3,000,000 | 1:50 |
3,000,000+ | 1:25 |
Frequently asked questions (FAQs)
How is leverage expressed?
How is leverage expressed?
Leverage is shown as a ratio, such as 1:10, 1:100, or 1:500, indicating how much the trading power is multiplied.
Does higher leverage mean higher profit?
Does higher leverage mean higher profit?
Higher leverage increases potential profit, but it also increases potential losses. Both gains and losses are amplified.
What is margin and how is it related to leverage?
What is margin and how is it related to leverage?
Margin is the amount of money required to open and maintain a leveraged position. Higher leverage means lower margin requirements.
Is leverage mandatory when trading?
Is leverage mandatory when trading?
No. Leverage is optional. Traders can choose lower leverage levels to reduce risk exposure.
Can I change leverage on my trading account?
Can I change leverage on my trading account?
Yes. Leverage can usually be changed in your Personal Area, subject to account conditions and open position requirements. Visit this article to find out more about how to change leverage.