Forex Leverage Example 1:50 - Example Leverage 1:50 or 0.5 Lots

If you have a 1,000 dollar account with leverage 1:50 you can buy a maximum of 0.5 lots which is equal to 50,000 dollars contract(0.5 Standard lots).

Let us calculate profits and losses based on three examples of used leverage, based on $1,000 trading account:

0.5 lots (1:50)

NB: This is the Leverage used not the Maximum leverage, If a broker gives you 50:1 leverage, but you only trade 0.1 lot the used leverage you are using is 1:10, But if you trade 0.5 contract then the you will use is 1:50 which is equivalent to Maximum leverage (1:50).

So the example referred in this below is talking of the leverage used based on the volume of the trade which you have opened.

Example 2 :(1:50 Leverage or 0.5 Lots)

For 0.5 lots 1 pip equals $5 dollars

If you make a profit of 100 pips the profit in dollars is

0.5 lots

1 pip = $5 dollars

100 pips = 100 * 5 = $500

Total= balance + profit

= 1000+ 500

= $1,500 dollars

If you make a loss of 100 pips the loss in dollars is

0.5 lots

1 pip = $5

100 pips = 100 * 5 = $500 dollars

Total= account balance - loss

Total= 1000 - 500

Total= $500 you have just lost half of your trading account balance

From the above example you can see that the more leverage you use the greater the profits or losses and less you use the lesser the profit or loss.

It's therefore better to use less leverage so as to cap the risks involved. The greater the leverage ratio used the greater the risks. This is one of the leverage guide-lines not to trade with more than 1:5 leverage ratio.

In money management leverage guidelines: It's always recommended to stay below 1:10 ratio which's also still high, most professional money managers use 1:2 meaning they trade only two lots for every $100,000 dollars in their trading account.

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Forex Leverage Example 1:50 - Example Leverage 1:50 or 0.5 Lots

Example 2 :(1:50 Leverage or 0.5 Lots)