I always see so many traders who trade forex, but still don’t know what margin, leverage, balance, equity, free margin and margin level are.
Margin and leverage are two important terms that are usually hard for the forex traders to understand. It is very important to understand the meaning and the importance of margin, the way they are calculated, and the role of leverage in margin.
Leverage is a feature offered by the broker, to help the traders to trade larger amounts of securities by having a smaller account balance. For example, when your account leverage is 100:1, you can buy $100 by paying $1. Therefore, to buy $100,000 (one lot), you should pay only $1000 (this is just an example. I know nobody pays dollar to buy dollar