Being highly volatile and risky, trading in the forex realm is not just a piece of cake. From leverage to pips, traders should keep a keen eye on every aspect of the market to make a better hold on their investments. Still, some traders are ready to take the chance with higher leverage to make an additional profit while exposing themselves to higher losses.
A relatively small price movement in a contract may result in immediate and substantial losses in excess of the amount invested. Though low margin deposits or trade collateral permits a high degree of leverage, the trader might lose the entire investments on a single go as the high degree of leverage available can work against them. Some traders may decide to commit up to 100 percent of their account assets for margin or collateral, but the aggressive use of leverage will increase losses during periods of unfavorable performance.
Forex traders should choose the level of leverage that makes them most comfortable. If you are conservative and don’t wish to expose to higher losses, an average level of leverage just like Trust Capital’s might be more appropriate than opting for a higher range.
However, in March, the European Securities and Markets Authority (ESMA) announced having agreed on a range of measures intended to harmonize EU-wide regulation and to provide better protection to retail clients trading leveraged products. These intervention measures have been now reintroduced via a directive by CySEC. This approach solidifies the ESMA Intervention Measures.
These newly introduced regulations are likely to restrict the traders from investing in the market aggressively and get shielded from unexpected charges. Also, brokers will get more transparency about the losses that clients suffer, offering them a better choice.
In any case, it’s always better for any trader to understand the working principles of leverage, negative balance protection, margin call rule, in trading and trade with a broker like Trust Capital. As a result, traders can save themselves from not get into a position where a single trade wipes their entire account out in a matter of minutes.
Risk Warning: This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. Trust Capital does not take into account your personal investment objectives or financial situation. Trust Capital makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast, or other information supplied by an employee of Trust Capital, a third party or otherwise.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Trust Capital does not offer Contracts for Difference to residents of certain jurisdictions including the USA, Iran, North Korea, UK, Czech Republic and Belgium. Please consider our “Risk Disclosure“.