The leverage in CFDs trading
Olymp Trade offers a special tool, the leverage while trading the CFDs. It works in a way that the traders are borrowing additional funds from the brokers.
Thanks to the leverage the traders can invest higher amounts than they really have at hand. It is a great opportunity, though enormous risk as well. Because you do not only increase a profit but also a loss. So use it carefully and avoid the times of high volatility on the markets.
The leverage in action
I will present how the leverage works in the examples.
Our trader’s name is John. He opens a CFD transaction and puts $100 in it. He anticipates the price to rise.
He decides not to use the leverage. It means it is 1 to 1. If the stock price increases by 1 percent his profit will also grow by 1 percent. He won a trade which means he earned $1.
Another trader’s name is Stephen. He opens the very same transaction and also invests $100.
What is different, he decided to apply the leverage 1 to 10. This means that when the stock price increases by 1 percent, his profit will grow by 10 percent. He has just gained $10.
Now, what will happen if the price does not go in the expected direction? Well, the loss will be multiplied accordingly. Nevertheless, you will not lose more than your investment. In Stephen’s case, $100.
The leverage on the Olymp Trade platform
You will find the leverage in the menu on the right side of the platform, right next to the investment amount. Remember, that the leverage is not the same for every asset. It will also be different when you open a trade at a different time.
Take note also that leverage is a very powerful tool – just as it can win you many times over the initial amount, you can also lose many times over your initial amount. Use leveraging very carefully, especially if you’re a beginner.
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