Trade Forex Trading

Leverage Example 1:10 - Example Leverage 1:10 or 0.1 Lots

If you have a 1,000 dollar account with leverage 1:10 you can buy a maximum of 0.1 lots/contracts which is equivalent to 10,000 contract(0.1 Standard lots/contracts).

Let's figure out the Forex gains and losses using 3 examples of how leverage is used, assuming a trading account with $1,000.

  • 0.2 lots (1:10)

Please Note: This shows the Actual Leverage used, not the Maximum: even if a broker gives you 1:10 leverage, and you trade 0.1 contract/lot then the actual leverage used is 1:10, - and if you trade 0.1 contract then the actual leverage used equals the Maximum leverage (1:10).

The example referenced in this guide pertains to the leverage utilized based on the trade volume you have opened.

Example 3: (Leverage 1:10 or 0.1 Lots)

For 0.1 lots 1 pip equals $ 1

A 100-Pip Profit Translates to This Dollar Amount

0.1 lots

1 pip = $1

100 pips = 100 * 1 = $100

Total=balance + profit

= 1000+ 100

= $1,100

If you accrue a loss of 100 pips the loss amount in dollars is

0.1 lots

1 pip = $1 dollars

100 pips = 100 * 1 = $100

Final Tally = account capital minus deficit

Total= 1000 - 100

Total= $900 you've just lost 10% of your account balance

You can see from the example above that if you use more leverage, your profits or losses will be bigger, and if you use less, they will be smaller.

Use low leverage to cut risks. Higher ratios mean bigger dangers. Stick to no more than 1:5 as a rule.

In money management rules, stay under a 1:10 ratio. That's still high. Many pro fund managers stick to 1:2. They trade only two lots for every $100,000 in their account.

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