Lots & Leverage
To recognise the size of a lot, you must understand that one standard lot equals 100 000 base or account currency units. Alongside a standard lot, there are two more types – mini and micro. A mini lot equals 10 000 units when micro – 1,000 units.
What is leverage
Leverage is when one utilises borrowed funds for funding the acquisition of assets hoping that the income of the new asset and capital gain would surpass the cost of borrowing this is better known as financial leverage.
It is advised to utilise leverage wisely due to the fact that you may lose the entire equity in a short period of time and you may not even notice it.
How does leverage work
Leverage helps the buying power for the traders. This allows investors to control a larger investment then their capital this increases their returns while investing investing a percentage of the overall value in question.
For example, if you trade 1 lot of EURUSD, (worth €100,000), with leverage of 1:1 (no leverage), you will need to physically have 100k euros in your account to place this trade.
If you have leverage, let’s say of 1:10, then €10,000 will be required to place the same trade, and so on.