The concepts of forex leverage and margin are widely used in most financial markets. Investors can use the idea of leverage to potentially increase their profits on any particular investment. In the Forex markets, the leverage on offer is amongst the highest available in the financial markets. Typically, in the forex markets, leverage levels are set by your forex broker and can vary from 1:1, 1:50, 1:100 and even higher.

To invest in forex trading, the first thing you need is a forex trading account with a broker. The initial amount that needs to be deposited into this trading account will depend on the margin percentage agreed between you and the broker.

Standard trading is done on 100,000 units of currency. For this level of trading, the margin requirement would typically be from 1 - 2%. On a 1% margin requirement, the investor would have to deposit $1,000 to trade positions of $100,000. Effectively, the investor is trading 100 times his or her original margin deposit. The leverage in this case is 1:100. One unit controls 100 units.

Leverage of this magnitude is significantly higher than the 1:2 leverage usually provided on equity trading for example or the 1:15 on the futures market. These leverage levels are only possible due to the lower price fluctuations on the forex markets as opposed to the higher fluctuations on the equity markets.

Typically forex markets change less than 1% a day. If the forex markets fluctuated as much as the equity markets for example, forex brokers would not be in a position to offer such high leverage as this would expose them to higher than acceptable risk levels.

Using leverage allows for significant scope to maximize the returns on profitable forex trades. After all, applying leverage means you can be controlling currencies worth 100 or more times the value of your actual investment.

Leverage is a double-edged sword however. If the underlying currency in one of your trades moves against you, the leverage in the forex trade will magnify your losses.

If this happens and your margin drops below the required levels, FXCC may initiate what is known as a "margin call ". In this scenario, we will either instruct you to deposit additional funds into your forex account or close out some or all of your positions to limit loss to both yourself and us.

Your trading style will greatly dictate your use of leverage and margin. A well thought out forex trading strategy, prudent use of trading stops and limits and effective money management can make for profitable application of leverage and ultimately, profitable forex trading.

At FXCC, clients may select their required leverage from 1:1 all the way up to 1:300.

Clients looking to change their leverage levels can do so by submitting a request to: accounts@fxcc.com

If you are looking to trade higher leverage - keep in mind: Leverage is a tool. Used properly it can allow for maximized profits. Used unwisely, leverage can turn around and bite.

RISK WARNING: Trading in Forex and Contracts for Difference (CFDs), which are leveraged products, is highly speculative and involves substantial risk of loss. It is possible to lose more than the initial capital invested. Therefore, Forex and CFDs may not be suitable for all investors. Only invest with money you can afford to lose. So please ensure that you fully understand the risks involved. Seek independent advice if necessary.

RISK WARNING: Trading in Forex and Contracts for Difference (CFDs), which are leveraged products, is highly speculative and involves substantial risk of loss. It is possible to lose more than the initial capital invested. Therefore, Forex and CFDs may not be suitable for all investors. Only invest with money you can afford to lose. So please ensure that you fully understand the risks involved. Seek independent advice if necessary.

FXCC does not provide services for United States residents and/or citizens.

FX Central Clearing Ltd is regulated by CySec (License Number 121/10).

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