What is forex leverage
Leverage allows you to trade with funds much larger than the amount invested in your trading account.
It is an interest-free credit facility that allows you to open orders over your trading account balance.
Typically, leverage is displayed as 20:1, 50:1, 100:1, 500:1 or 1000: 1.
What does it mean?
Let's say your trading account has a balance of 1,000 USD and you trade with 100: 1 leverage.
In this case, you can trade using an amount that is 100 times the balance in your trading account, namely the volume of your trade order can be equal to 100,000 USD.
Margin is the amount of collateral to cover any credit risks arising during your trading operations.
Margin is expressed as the percentage of position size (e.g. 5 % or 1 %), and the only real reason for having funds in your trading account is to ensure sufficient margin. On a 1 % margin, for instance, a position of 1,000 USD will require a deposit of 10 USD.
The margin in your trading account needs to be equal or above 100% for you to be able to open new trades unless the new trades will result in your trading account is fully hedged. Clients do not pay a margin on hedged deals, due to margin offset.
Size of the leverage
With AZA, you can trade with leverage ranging from 1: 1 to 500: 1. If you want to increase the leverage for a trading account up to 1:1000, then you need to make a deposit from 500 to 2000 USD and make a request in the Client Portal.
Even if your trading account has a leverage of 100:1 (for example), this does not mean that all positions for all trading tools will use this value to calculate margin requirements. This value is the limit of the size of the leverage on this account.
Depending on the type of trading instrument, leverage may be smaller than 500:1.
For example, most currency pairs have a maximum leverage of 500:1, energies 100:1, precious metals, such as Gold and Silver, have a maximum leverage of 200:1.
You can see the description of the leverage for each group of trading instruments on the Accounts Details page.
Change in leverage for already open orders
You will always be able to control your finances because for open orders the leverage remains the same as at the moment of opening a position. AZA does not change the leverage at the end of the trading session, at night or on weekends.
But the company reserves the right to reduce the leverage for new positions at its sole discretion, without prior notice, on any or all of the client's accounts.
Leverage and risk management
Even with a small investment, leverage will allow you to make significant profits. But without proper risk management, you can also incur significant losses. Therefore, to select the optimal risk level, you can independently change the leverage for a trading account in the Trading Terminal.
The margin requirements are always converted to the currency of the trading account.
By controlling used and free margin, you can control your level of risk.
The used margin is the participation of a part of your deposit in a trade to open or place a pending order. When an order is closed, the used margin becomes free.
The free margin varies depending on the results of open orders. Paper profits can be used to open new positions.
A margin call is a notification of insufficient funds to maintain margin requirements for open orders.
While each client is solely responsible for monitoring their orders and balance, the trading terminal notifies clients so they can deposit additional funds or close open orders.
You can independently set in the Trading Terminal the percentage level from 10 to 100% of the Margin Call for each trading account.
Stop Out Level
Stop Out is a situation when the terminal forcibly closes open orders if there are not enough free funds to maintain the margin requirement for open orders. When the free margin reaches this level, your open positions will be automatically closed. For trading accounts Stop Out is 5%.