Dear Fellow Traders,
I am relatively new to trading and one point which I’m still a little bit puzzled about is leverage.
Is leverage only applicable to traders who actually buy and sell currencies rather then what I’m doing, which is spread betting?
I keep reading statements such as “Spot Forex is traded in lots. The standard size for a lot is $100,000. There is also a mini lot size and that is $10,000”, and to only open an account with minimum of $1,000.
If I’m using the fundamental money management rule; only risk 2% of my bank in each trade. If I were spread betting and only had an account of $500, why couldn’t I trade 2% of this?
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Also for the following example, would anyone be able to answer my question please…
So for example, I’ve opened a standard account with IG Index and have deposited £1000. I’ve decided to be cautious and only risk 2% per trade. My first trade materialises and the initial risk is 30 pips. 2% of my £1000 bank is £20, 30 pips divided by £20 = £0.67 per pip. I would open a trade at £0.67 per pip.
From what I can gather on the example above I’m not using any leverage, is that correct?
This is my first post on Babypips so I hope it goes ok 🙂
Your advice would be much appreciated.
Thanks a lot
