1:20 Leverage on a $2,000 account?
Hey everyone,
I am new to forex and I was just wondering what 1:20 leverage means when I have a $2,000 account?
I recently signed up for OANDA and selected a leverage of 1:20. If I deposit $2,000, and put my volume as 1.00, what does that mean?
How much money am I losing or gaining per pip?
Am I risking all my capital ($2,000) if I open a trade on a volume of 1.00 on 1:20 leverage?
I traded using eToro a couple of times and whenever I open a trade, I am able to select how much money I wish to use on a trade and select my leverage.
However, for OANDA on MT4, when I open a trade, it only asks for VOLUME, TP, and SL. Why am I unable to select how much money I wish to use to open the trade? What if I only wanted to use $1,000 instead of my $2,000?
I am really confused and any help would be appreciated.
Thanks!
So what is the difference between a mini and standard account? How do I know what account I have?
20:1 leverage mean that using $2,000 of your money, you can buy $40,000 worth of foreign currency. (But the margin requirement is different for each currency pair).
MT4, along with most Forex brokers, asks for a lot size when you place a trade, instead of asking for the amount of currency you want to buy. But the value of a lot depends on whether you have a mini account or a standard account.
On a mini account, if you buy 1 lot of GBP/USD, you’re buying $10,000 worth of GBP, and you’re gaining or losing $1 per pip (where 1 pip is 0.0001, not 0.00001).
On a standard account, you multiply by 10, so you’re buying $100,000 worth, and each pip is worth $10.
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LikeDislike1:20 leverage means you can afford at most -5% decrease in your chosen security.
For example, Security A worth $40,000. Under 1:20 leverage, you can have the security with $2000. If A increase by 5%, i.e., to $42,000, your profit is $2000. That is to say you gain 100% profit. If A decrease by 5%, i.e., to $38,000, you lose all your money.
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LikeDislikeUse a leverage calculator online.
The main reason you should care about leverage is that it affects how much MARGIN is put on hold each time you open an order. I think at 1:20, they will put on hold $250 dollars for each mini lot you open. Thus, you will not be able to open 10 mini lots, because that would require $2500 of your money to be put on hold. Other than this, the leverage does NOT affect how much money each pip is worth. It ONLY affects how much margin is put on hold. Higher leverage means that less of your money is put on hold in the margin, which means you would then be able to maybe buy 10 mini lots, or even 20 or 30 mini lots, if you had higher leverage, without your whole account balance going into the margin hold.
A good broker to use is AAAfx right here, they will give you higher margin even if your account is in the USA (up to 1:200 if you ask for it): https://comefollowme.zulutrade.com/SignUp_Live.aspx , at least that’s what they told me in the live chat.
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