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Leverage in Forex is much different than the type of leverage you will find in any other type of trading or investing. When you leverage, you are borrowing on margin to increase the size of your trade beyond what funds you have available in your account. In stocks and other equities, you can establish leveraged trading on your account which may allow you to as much as double your purchase.

However, in Forex, double is simply unheard of in most cases.  When you deal with leverage in Forex, you are looking at, most often, ten times up to four hundred times the balance in your account.

With Forex, brokers can offer you this extremely high leverage because the market is so liquid that they almost never have to worry about you owing them money back if the trade goes bad.

Margin call policies at many brokers have been designed to issue a margin call on your account well before any possibility of a negative balance occurs.

However, with some brokers, if the market moves against your position too rapidly, you may incur a total loss of your funds and even a negative balance.  Therefore it is advisable that you check your broker's margin policies to know whether this could happen to you.

Considering leverage, many brokers offer you varying options for leverage amount. If you go with, say, 50:1 leverage, you are allowed to make a transaction worth fifty times the balance in your account.

So if you have one thousand dollars in your account, you can make a trade worth fifty thousand dollars.  If that seems extreme to you, just remember that some brokers offer as much as 400:1 leverage.

Because of this, you should never use money you need; the funds you trade with should be funds you can stand to lose.

It's important that you are careful with leverage.  Greater leverage may seem wonderful, but it is a tremendous risk to your funds.  Too big a position can lead to total loss before your trade has a chance to move in favor of your position.

Exercise strong money management discipline to avoid this. It is recommended that you never enter a position that uses more than ten percent of your available margin balance.  This will give you some room for the fluctuations that occur in the market.

After all, you're in Forex to make money, not to lose it.  If you have any concerns about margin policies and how to manage your margin trades, be sure to talk to your Forex broker and clear all questions you have before you put your money at risk.

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