Leverage, which is also an attraction of Forex trading, can trade at a higher magnification than the funds. Since Forex can trade many times a day, it is possible to accumulate profits efficiently by applying leverage to each transaction.
Leverage that can be dealt on Forex is limited by the Forex company. Domestic Forex companies has a limit of 25 times, so it is necessary to trade using an overseas Forex company to be able to trade with more leverage.
It is said that risk is involved in trading with high leverage. It is one of the reasons why Forex trading is said to be high risk compared to other investment, but depending on investment it is also possible to do Forex with low risk. It can be said that traders themselves need to understand the merits and demerits of leveraged trading.
Loss of Forex company when leveraged
When a trader deals with leveraging, since it is done larger than the funds, you may think that Forex company losses as it is when a trader made a profit.
However, since the Forex company deals with orders from traders and conducts opposite transactions from banks, but the Forex company has the mechanism not to lose. You can cover traders' orders by being able to cover cross trading regardless of how high leverage you trade.
By the way, if only with traders with bank dealings and cross trade, there is no profit for Forex companies. By setting trading fees and spreads, the Forex company gains profits to operate the company.
When the rate is moving fiercely, there is a case that there is a gap in the rate when the Forex company places an order to the covered bank at the timing of receiving the order from the trader from the relation of cross trade. Slippage and re-quote which cannot be settled as ordered as a result of doing cross trade. Forex companies have a greater risk of not being able to respond to fluctuations in sharp fluctuations, rather than how much traders leverage and trade.
Leverage and risks of overseas Forex companies
In overseas Forex companies, there are many places that deal with NDD method.
This transaction is a method that allows direct dealings with the market, so it is popular because it allows transparent Forex trading. In addition, in the case of overseas Forex companies there is no upper limit on leverage, so some Forex companies you can trade hundreds of times leverage.
Again in this case, a Forex company only plays a role as an intermediary with the market, so the risk of Forex company suffering even if the trader applies transactions with high leverage is not large. However, the profit of the Forex company gets bigger as the trader wins, so we do not lavish with an investment to win against the trader. On the contrary, a domestic Forex company that adopts the DD method with a relative trading, so the Forex company is profitable as the trader's loss increases.
Risk of trader's own leverage
By trading with high leverage, the return will increase accordingly. On the contrary, if a loss occurs by leveraging it, a loss may be more than the funds, so there is a possibility that the account may become negative. Normally it will be forced to be settled when margin falls below the margin so the money will never get negative, but if the rate fluctuation is severe it may become negative.
Many traders adhere to low spreads and transaction fees in Forex trading, but when dealing with high leverage, whether or not you can make a contract as ordered is an important factor. Risk of trader's own leverage can be reduced according to your choice of a Forex company.
How to select a Forex company that is conscious of leverage
Trading with high leverage, from a regulation, sit is necessary to open an account at an overseas Forex company. Even if conditions are good, it is possible that overseas Forex companies are offering services in line with that country, mostly because they can trade with high leverage. Therefore, even if you access the webpage of an overseas Forex company, you may not be able to reach the account opening as it is in a foreign language.
Overseas Forex companies that are often used by Japanese traders have Japanese language support. GEMFOREX is complete with Japanese language support, and with a maximum leverage up to 1000 times. Furthermore, with a contract rate which is contracted as ordered higher than 99%, so risk associated with leverage can also be reduced. It is also the reason why GEMFOREX adopts the NDD method that can handle high risky transactions with low risk.
There is no risk in leverage itself. Whether leverage is a risk depends on the Forex company that a trader opens an account. When applying high leverage, it is important to firmly select the Forex company.