Leverage is the ability to gear your account into a position greater than your total account margin. For instance, if a trader has $1,000 of margin in his account and he opens a $100,000 position, he leverages his account by 100 times, or 100:1. If he opens a $200,000 position with $1,000 of margin in his account, his leverage is 200 times, or 200:1. Increasing your leverage magnifies both gains and losses. If he opens a $500,000 position with $1,000 of margin in his account, his leverage is 500 times, or 500:1.
What is Spread?
Spread is different price between Bid and Ask. The difference between the sell quote and the buy quote or the bid and offer price. For example, if GBP/USD quotes read 1.4200/03, the spread is the difference between 1.4200 and 1.4203, or 3 pips.
What is Pip?
Pip is a small amount on price movement. Exp : GBP/USD : 1.4000 change to 1.4001 so movement pip is 1 pip.
What is Lot?
Lot is same name with Volume. The standard unit size of a transaction. Typically, one standard lot is equal to 100,000 units of the base currency, 10,000 units if it's a mini, or 1,000 units if it's a micro.
What is Margin?
Money that you need to use for open or maintain position. Amount of margin required is depend on how much you use lot to trade.
Margin calculation : LOT * CONTRACT SIZE * CURRENT MARKET PRICE / LEVERAGE
Example Calculate Margin :
GBP/USD : 1.5020 (current market price)
Lot : 1.0
Contract size : 100,000
Leverage : 1:200
So, 1.0(lot) * 100,000(contract size) * 1.5020(current market price) / 200(leverage)
- 1.0 * 100,000 = 100,000 * 1.5020 = 150,200 / 200 = $751 margin use.
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