Most brokers these days advertise leverage as one of the selling points of opening an account with them. To put it plainly, Forex traders use leverage as a means of placing a high value trade whilst only risking a fraction of it. It is commonplace to find brokers advertising leverage of 100:1. Simply put, your broker will allow you to trade 100 times what you actually deposit.

In this example, the broker is saying that he will ‘lend’ you the money to make your trade, if you put forward 1% of that trade as a security against it. That 1% is called a margin: the percentage of the total trade required as collateral. This 1%, when expressed as leverage becomes 100:1 (a security of 1 is required for every 100 traded). You will even find brokers who are willing to give you a higher leverage, even up to 400:1 (meaning they require only 0.25% security).

So by using leverage as a forex trading strategy, you could control a trade worth $100,000 with only $1000 at risk when the quoted leverage is 100:1. For someone looking to start a career in Forex trading, but has limited funds to begin with, this would seem like a gift from heaven.

What many new traders who fall for the allure of leverage advertised by brokers don’t realise, is that the quoted leverage available is the maximum leverage allowed on your account. You don’t actually have to use all of it. In fact, it is best to use as little as you can, because the more leverage you use, the more you are at risk from fluctuations in your trade value.

Going back to our example using a 1% margin to buy lots to the value of $100,000 (leveraging your $1000 by 100%). You now have open trades worth $100,000, but only a breathing space of $1000. A fall in value of your lots by just 1% means your £1000 would be lost and your broker would make a ‘margin call’ (this means some or all of your trades would be closed automatically).

You may want to put in place a stop loss to prevent this happening, further narrowing your breathing space somewhat. So far we haven‘t even mentioned your brokers‘ spread, which would more or less leave you unable to suffer the smallest move against you. Yes I am being negative, and it is possible your trade will turn a profit. However, Forex markets can be volatile and your lots could easily dip below your stop loss before turning around and becoming profitable. Because you were too heavily leveraged, your trade closed at a loss because you had no room to breathe.

Sensible traders will not leverage their accounts too heavily. Instead of taking the maximum 100:1 on offer, a much more level-headed option would be to take say 20:1 (which would be a 5% margin).

In this trade you would be controlling lots valued at $20,000, but you now have a breathing space of 5%. You can now place a stop loss that gives you room for a possible dip without your trades closing out before they turn into profit.

Forex trading leverage will always be a good way to let traders use the market to their advantage with minimal risk, but when used recklessly then a slight move against you could see your trading balance wiped out very quickly. With the right approach to using leverage, it is a method that allows an ‘average joe‘ to trade in volumes they would otherwise not be able to afford. When using leverage in your trading it is vital that you do not leverage your account too heavily and that it should be used as a tool to give you an advantage in the market, not your broker.

If Forex trading sounds too complicated to you, why not try automated trading? With a robot like the MegaDroid Forex robot, you can free up more time to learn while the robot trades for you!

Being a forex or foreign exchange trader no longer means you have to work for a bank in one of the world’s financial centers. Anyone can trade forex these days, even from your own armchair. Some people even choose to have a forex trading robot, like the Forex Megadroid Robot do all the work for them.

The internet has blown the forex market wide open, making it available to just about anyone with an internet connection. But what is forex trading and how does it work?

A foreign exchange trader deals in currencies. He or she will sell one currency that seems to be falling in value, to buy another that seems to be rising. All forex transactions require two currencies, called a currency pair, because is order to buy the currency you think will rise, you need another currency to sell in return.

Beginners often start by trading the Euro and the US dollar pairing, which you will see written as EUR/USD. This is the most traded pairing in the market. There is plenty of information available for this market and it tends to have lower costs and be relatively stable.

Nevertheless forex is a very volatile market. This means that the prices can rise and fall steeply and quickly. The risk is high, and it is easy to lose money. In fact, some losses are inevitable, so you should manage your account so that you never risk too much on one trade. Stop losses are commonly used, which tell your broker to sell when a trade is going against you to minimise losses. The aim is not to have no losses, but to make sure that your profits are higher than your losses so that you end up with a net gain.

A computer with a good internet connection is the first tool you will need to trade forex. Unless you use a robot like Forex Megadroid to control your currency trading, you will also need time where you can concentrate on learning a profitable system and then on trading itself. You should set aside a few hours a day so you can do this, with no interruptions or distractions. You must be fully concentrated on the movements in the market or you could miss the right moment to either open or close a trade.

If you are a cautious person who likes a solid investment with predictable low returns, you should not become a currency trader. Forex traders are people who enjoy risk and love the challenge of trying to turn a profit in a fast moving market.

To be a successful forex trader, it is important not to let fears of losses or dreams of huge wealth divert you from your strategy. You also need to stay aware of financial news, not only in your own country but in all of the major economies, because it does affect the forex markets. With these characteristics and a good trading system in place, a foreign exchange trader can reap substantial gains from his or her investment. And if you need help to get started as a beginner, why not download Forex Megadroid to give you a kick start?