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February 13, 2014

The Benefits and Dangers of Foreign Exchange Sydney Leverage

This article looks at the benefits and dangers of using leverage on the foreign exchange Sydney.

Foreign Exchange Sydney Leverage

There are a lot of traders who are drawn to the foreign exchange Sydney by the leverage that you are able to get.  The foreign exchange Sydney offers more leverage than any of the other trading markets.  It is important that you understand the benefits and dangers of leverage when you trade.  When you understand this you will be able to determine the amount of leverage that you should use and the impact that it will have on your trading.

The Leverage That You Can Get

Before you look at the benefits and the dangers of leverage you have to know about the leverage that you can get.  The amount of leverage that your broker offers you will be decided on by the broker.  There are some brokers that operate under regulations that stop them from offering any leverage that they want.  These brokers will be restricted to offering you leverage of 50:1 on a standard account and with the most commonly traded pairs and 20:1 on mini accounts and the exotic currency pairs.

The restrictions on the leverage that you get have been implemented to protect the trader.  There are many traders who have lost everything through the incorrect use of extreme leverage.

The Benefits of Leverage on the Foreign Exchange Sydney

There are a number of benefits that you can find with the use of leverage.  The primary benefit is that leverage will increase the profits that you are able to make.  Leverage is able to this by offering you greater purchasing power when you are trading.  Leverage allows you to borrow capital from your broker using your trading account balance as the collateral.

Another benefit of leverage is that you can trade on the foreign exchange Sydney with a very low amount of capital.  As the amount you are putting into your trade is increased when you use leverage you do not have to have that much capital.  Of course, you have to consider the risks that come from using leverage with low amounts of capital.

The Dangers of Using Leverage

While there are a number of benefits that you can get from the use of leverage there are also a number of dangers that you have to be aware of.  The primary danger that you face when you use leverage is the risks of your trading.  Any use of leverage will increase the risks of your trading.  The risks of your trading could easily be brought above the level that you are comfortable with and capable of using.

Another danger to trading with leverage is the amount of capital that you need.  Many traders see leverage as their way of trading on the market with a limited amount of capital.  However, when you do this you will be increasing the risks of your trading exponentially.  It is recommended that traders who have low amounts of capital should use limited amounts of leverage.  The small capital that you have will not be able to buffer the losses that you can face when you use leverage.

 

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