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pair using leverage. In the next lesson, we're going to

enables you to take multiple trades at a time or keeping

sell one whole lot is called a standard lot and this is equal

leveraged position. For a professional trader, leverage

But for the emotional gambler who tries to get rich quick,

currencies are traded in specific amounts called lots

if you are an inconsistent or losing trader, abusing leverage

not increase your edge. It merely takes you to wherever

all it does is amplify your losses to be even bigger. So in

leveraged all the way up to $50, 000 sounds pretty

change depending on your broker and how large your trade size

but again don't worry all of this we will discuss in more

one reason that traders end up blowing their accounts. It's a

correctly and pretty much automatically. There are

of leverage to choose for your brokerage account such as

dollar good face deposit and then upon closing the trade,

when you're trading margin, your margin requirement will

can see this makes an enormous difference to your trading

account balance disengaged from the market. So when trading on

earn a $1, 500 profit on the trade but on the exact same

put up $500 rather than 50 grand to place the trade as you

without leverage you had to put up 50 grand to your broker to

significant right so let's say this with a second example with

pip profit which equates to $1, 500 because nought. 5 lots is

positions and they're really common ratio is 100 to one and

the effect that this has on your trade is pretty

account and even if you did would you really want to put up

that you must essentially deposit with your broker to

leverage so let's assume that you buy half a lot so nought. 5

So, the first trade example will be trading without

clear of how leverage helps us to make money trading effects.

uneducated traders. So, leverage gives you large buying

course it can also bring the risk of much much bigger losses

how to risk manage professionally, leverage will

$100, 000 position now when you close a leverage position like

in this case that would only be $1, 000 for you to control a

of that trade cost in margin to the broker as essentially a

of initial capital so they're kind of struggling to get your

000 or dollars or whatever and then the bank gives them a big

mortgage on top of that they give them the rest of the money

good faith deposit in all to control that large position so

is essentially the same as the margin that you put up with

open and control large positions with a small amount

trading with borrowed capital and this is how you're able to

instead you just put down a small deposit with your broker

without having to pay the full value of your trade upfront

the means of gaining exposure to large amounts of currency

amounts of money well let me introduce you to the wonderful

dollar but some of you probably how on earth a you know small

trader like yourself can possibly trade such large

is nought point nought one lots and is equal to just 1, 000

would just represent 10 cents a pip now if you want to buy 100,

lots and is equal to 10, 000 units and therefore a micro lot

is not going to just suddenly magically make you profitable,

effectively manages their risk, leverage is a powerful tool.

margin is the term used to describe that initial deposit

having to pay the full value of your trade up front so remember

you are going much faster. So what do I mean by that? Well,

instead you just put down a small deposit known as margin A

effect so because we now have 100 to1 leverage instead of

detail in the following lessons now having a $500 margin

and then there's going to be country specific regulations

various factors that come into play when deciding what amount

or keeping your risk minimized and the majority of your

same degree that it magnifies your downside. Leverage does

that you use leverage you still made the same $1500 profit by

two to one all the way up to five hundred five hundred to

regime as it enables you to take multiple trades at a time

trades and the tools that we use to quickly and

by 100, which gives us $500 so in the first trade example

one. In some cases, I've even seen a thousand to one. Now,

perform yourself. The brokerage platforms make it extremely

automatically calculate everything. So, there's

for us brokers recognize that not everyone starts with large

then become an effective tool to increase the efficiency of

ratio right and the margin requires is the amount of money

the exact same trade but now with a 100 to1 leveraging

trading accounts so they allow you to leverage up your

place the trade which in this case is the full 50 grand cost

of the value of the trade because you don't have any

your capital when it's put to work rather than it being a

initially put up now while that does magnify your profits of

liability for increased losses like how it is the majority of

ratio what this means is that you only have to put up 100th

in the market so if you were to buy one lot of your dollar you

000 because remember one whole lot of your dollar is 100 grand

head around it all it basically is it's the exact same way in

leverage depending on the amount of money that you

would be buying 100, 000 units right now like I was saying

initially give them so deposit that you would give to the bank

calls you to take two or three trades all at the same time

gives you your $1500 profit but what you don't have a $50, 000

worth $5 a pip on your dollar so 300 pips multiplied by $5

example let's say you have a great trade and you make a 300

which you know people go to the bank they put down say 10, 020,

we know how you can profit from buying or selling a currency

keep your your your risk minimized at all times. So Now,

that's a lot of money to put up but your broker helps you out

management module, you're going to learn exactly how to

that you put up with the broker to open and maintain a larger

look at how to analyze the Forex market so we know when to

to 100, 000 units a mini lot is nought. 1 lots and this is

which represent the units of base currency that we buy or

you rather than against you. For the professional trader who

your risk minimized and the majority of your account

you you will lose $10 a mini lot represents $1 a pip when

Euro dollar as your base currency so if you entered a

balance disengaged from the market. So in the risk

equal to 10, 000 units a micro lot is nought point nought one

gaining exposure to large amounts of currency without

lots and is equal to 1000 units leverage is the means of

summarize the key points that we have covered in this lesson

the risk management module, you're going to learn how to

000 euros with US dollars you would buy one lot of Euro

through a couple of of really simple examples just to make

and this is equal to 100, 000 units a mini lot is nought. 1

euro dollar position with a one lot position size what this

show the quantity in lots while some brokers now show the

slippage negative balance protection capital partitioning

of people you know they actually trade the markets with

change in your favor. More specifically that the currency

safely harness the power of leverage so that it works for

rates the abuse of leverage is probably arguably the number

amounts of greed which then manifests low eventual success

double-edge short. Leverage magnifies your upside to the

or loss that you make on the trade. Now, leverage varies

practically no math calculations that you have to

extremely simple for us to execrate execute our trades

going to cover in depth exactly how to position size your

that deposit is then returned to you plus or minus the profit

is. Now, don't worry about this right now because we're

leverage is by a fatal attraction. So just to quickly

leverage means high potential profit which leads to high

fantastic right well it is until you abuse it how do of

this example, all they ask for in return is a five hundred

dramatically with different brokers ranging anywhere from

trade in the second example with the only difference being

essentially loans you the 50 grand to place a trade and in

leverage, I want you to think of your broker as a bank who

trading nought. 5 lots of euro dollar but this time you only

value by the leverage ratio so in this case we divide 50, 000

need to put up $500 whilst you are in the trade so to

using up you know all of our 50 grand on the margin you only

those three trades that is not intelligent trading fortunately

using the entirety of your available funds just to place

your entire account on just one trade what if your strategy

you enter that trade $50, 000 of your account balance will

essentially be frozen until you exit that trade so in this

calculate the margin required you just divide the position

now you don't use any leverage so that's the same as a 1-1

then you need $150, 000 in your account but even then you'd be

leverage right so how that works in reality is that when

run through a couple of trading examples just to make it really

lots of Euro dollar which has a notional trade value of $50,

power with just a fraction of your capital. So, let's quickly

module dedicated to just risk management alone. When you know

so leverage trading therefore makes it extremely important to

trade instead of just on the small amount of margin that you

learn how to manage your risk which is why we have an entire

that your profit or loss is based on the full size of the

to then be able to go and purchase property right when

you go and get a mortgage that's the bank giving you

your broker and they give you the rest of the capital so that

you can then essentially control a large position size

by giving you leverage so let's say you have a 100-1 leverage

leverage position. My trading is simply the term used for

initial deposit that you put down to open and maintain a

known as margin. So margin is the term used to describe the

units now a standard lot represents $10 a pip when using

using Euro dollar as your currency and then a micro lot

and quotes that now one whole lot is called a standard lot

and powerful world of leverage and margin trading leverage is

will make $10 but then for every pip that it moves against

means is that for every pip that it moves in your favor you

currencies are traded in specific amounts called lots

which represents the units of base currency now most brokers

quantity in actual currency units so you just need to and

sure that it's really clear exactly how they work together

get familiar with how the broker that you use displays

these combined to make a profit from the market. Um we'll go

leverage they don't really have any idea how it truly works so

because you'd be quite surprised at how many millions

that you bought will increase in value compared to the one

that you sold. But before we start looking at how to execute

trades, first you need to have a really good understanding of

lots, leverage, and margin and how we then use all three of

As you now know, the objective of Forex trading is to exchange

one currency for another in the expectation that the price will

buy or sell.