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    How do I use leverage?

    When you trade Forex CFDs, you trade a leveraged derivative product. Leverage allows traders to increase their exposure to currencies and potentially magnify their profits with a relatively small initial deposit. ForexCT offers its clients up to 400:1 leverage. What does this mean? It means that you can increase your exposure to 400 times the margin required for the trade. Let’s look at an example.

    Step 1 You decide to open an AUD/USD trade.

    Step 2 Since you believe the Aussie is going up, the direction of your trade is BUY AUD, SELL USD.

    Step 3 The price is 1.0500.

    Step 4 The contract value is AU$10,000.

    Now that you have the trade specifications worked out, you want to know the margin amount you need to open the trade. Think of the margin as a form of collateral, where the amount of collateral needed is determined by your leverage. Let’s assume that you have 400:1 (or 0.25%) leverage on your trading account.

    The required margin for this trade would be calculated as follows: Contract value x (Leverage %/100)

    10,000 x (0.25/100) = $25

    In other words, a deposit of $25 in your account is required in order to open a $10,000 AUD/USD trade and have full exposure to that $10,000 position. The key point is that with leverage, you do not need $10,000 margin in your trading account to open this trade – you only need $25.

    PDS Reference 4.4:

    4.4 Leverage The Products we offer are leveraged products meaning that you only have to deposit a small percentage of the notional value of a Transaction. You should note that leverage magnifies your exposure to the movement in the price of an Underlying Instrument. This means that your potential gains or losses from trading the Products will be much higher than would be the case if you did not use leverage. Leveraged investments carry significantly greater risks than non-leveraged investments. It is very important that you understand all the risks associated with trading the Products we offer. These significant risks are outlined in Section 8 ("Significant risks").

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