Forex Leverage for Beginners Explained (lot sizes and pips)

Forex leverage is a great tool for beginners in forex trading to understand. In this video I will explain everything you need to know about forex leverage, pip, and lot sizes.

Leverage involves borrowing a certain amount of the money needed to invest in something. In the case of forex, money is usually borrowed from a broker. Forex trading does offer high leverage in the sense that for an initial margin requirement, a trader can build up—and control—a huge amount of money.

To calculate margin-based leverage, divide the total transaction value by the amount of margin you are required to put up:

Margin-Based Leverage = Total Value of Transaction / Margin Required
For example, if you are required to deposit 1% of the total transaction value as margin and you intend to trade one standard lot of USD/CHF, which is equivalent to US$100,000, the margin required would be US$1,000.

Margin-Based Leverage Expressed as Ratio Margin Required of Total Transaction Value
400:1 0.25%
200:1 0.50%
100:1 1.00%
50:1 2.00%
However, margin-based leverage does not necessarily affect risk, and whether a trader is required to put up 1% or 2% of the transaction value as margin may not influence their profits or losses. This is because the investor can always attribute more than the required margin for any position.

To calculate the real leverage you are currently using, simply divide the total face value of your open positions by your trading capital:

Real Leverage = Total Value of Transaction / Total Trading Capital
For example, if you have $10,000 in your account, and you open a $100,000 position (which is equivalent to one standard lot), you will be trading with 10 times leverage on your account (100,000/10,000). If you trade two standard lots, which are worth $200,000 in face value with $10,000 in your account, then your leverage on the account is 20 times (200,000/10,000).

In the foreign exchange markets, leverage is commonly as high as 100:1. This means that for every $1,000 in your account, you can trade up to $100,000 in value. Many traders believe the reason that forex market makers offer such high leverage is that leverage is a function of risk.

In trading, we monitor the currency movements in pips, which is the smallest change in currency price and depends on the currency pair.

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[billydickerson]

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[RobbelRoot]

I'm sure nobody will look, but i like this while rewatching videos or specific parts..
0:00 Intro
0:47 Start
1:12 A pip
1:40 Lot sizes
2:20 Win examples
3:19 1 SL Order
3:56 Leverage comes into play
5:30 Sumup
5:58 Tools for calculating
6:35 Demo trades
7:06 Outro

[hassanhaq]

I watched like 5 videos explaining leverage and this is the only one I understood, thanks man! 👍🏼

[andrehansson]

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[lasseoffenbach]

you are by far the best to explain this in terms that can be understood by a complete trade newbie like myself. I literally know zero about trading but would really like to learn, and your videos are the only ones explaining so it's easy to understand! - THANKS!!!

[robertprice]

Hi Arty, I'm still watching and re-watching these. Age of the video is not the thing, me having watched them for only a couple of months is the thing. I mean they are still all so great! - Thanks for sharing! - Robert

[pei-tzuchen]

You are my teacher and physician. Thank you very much.

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[nathanpayne]

This is by far the most easiest to understand for beginners, thank you

[jefftheentrepreneur]

I'm Sooo new to this that I have to learn everything and man, do you cover a lot. Thanks

[teeg]

The American leverage is inaccurate, I have a 50:1 with American broker. I've had it since 2018.
But I love the channel and keep up the good work. 👍

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[mediaguy]

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[katmonra]

Thank you! I’ve been looking for videos that thoroughly explain leverage and how to use it/set it up. It was not explained on the trading view tutorial video (a 20 minute video) and I want to practice paper trading using leverage just to get a feel for what I’m comfortable with!

[seniorcitizen]

I don’t know what you are doing in life right now, but you just explained this perfectly to a newbly like me

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