If you think I’m going to talk about borrowing money form a friend or taking a loan from a bank to trade Forex, you guessed wrong :)

Although, I’m glad you did think about the foolishness of borrowing money to trade Forex - no one should risk the money he can’t afford to lose!

In this topic, I’d like to talk about the other hidden way every trader borrows money from Forex brokers. It is done via leverage.

Just abstract yourself from the trading for a moment and think well about the next: Forex brokers lend you money to trade by leveraging your account, and they are so happy to do so… they must be looking like hungry monsters, waiting to eat you up on lunch… They know the lunch time will come soon :)

Forex brokers can leverage your initial investment as much as 400 times! This is mad. Even a 200 times leveraged account is serious! Well, may be there are 1 or 2 true genius out there who can take it as a beginner and instantly trade like a pro, but it’s not you and me.

Just think about it, you are accepting from a broker the money you don’t own, and you are putting them at risk, not a calculated risk, but, to some extent, an unknown risk,  such as the Forex currency market is. Is it wise?

Will you be broke soon or will you become a millionaire by risking it with the leveraged account? It depends: if you act silly and don’t learn about the leverage in Forex, you’re broke from the moment you accepted the leverage from your broker. Leverage not ONLY gives you the chance to profit MORE it gives you the same chance to lose MORE. If you don’t know how the leverage works, son’t squeal later that no one warned you.

If, however, you sort it out What and Why and Where the leverage helps you and hurts you, you can pull it out with ease, be it 40:1 or 400:1 leverage you start trading with.

** Forex Dark Lord **

Useful reading:
Forex leverage
Leverage and margin in Forex