Forex Currency Market is one of the largest financial hubs of the world where trillions of dollars are traded each day. It has become a safe haven for many investors and middle class people who are looking for additional household income in this though economical times but this market can be ruthless and it is full of hurdles and challenges. Successful currency trading in United Kingdom depends upon good trading strategy which is backed by proper research work.
Basic Concept of Currency trading In United Kingdom
Basically if you want to make some cash in the forex market, then you need to buy a currency at a lower price and then sell the same currency at a higher price to make some earnings, even though it sounds easy and simple but it is not the case. There are numerous factors involved which determine the success of trader in Forex currency market.
Let’s take an example, consider you have $1,000 in your pocket at the moment that you can spare, and you have decided to invest this amount in your live trading account. When you begin your trading activity EUR/USD is trading 1.35 which means that 1 Euro can buy 1 dollar and 35 cents. Furthermore, during forex market trading hours you forecast that Euro will rise against dollar during the day and based on this particular assumption you purchase 740 Euros against 1,000 dollars.
Moreover, your prediction about Euro rising comes true, and EUR/USD pair is at 1.36 which means a profit of 6 dollars. At the end of day you decided to trade 740 Euros for 1,006 dollars.
Concept Leverage to Increase Profits
Continuing with the above example, where you made only 6 dollars profit from your trade. A question which comes into the mind of most forex beginners is that “is there any way to maximize profits?” well there is a way to enhance profit potential by using leverage offered by the brokers.
Leverage is basically use of financial instruments or loan that AAFX trading provide to traders so that they can trade in forex currency market. Moreover, the size of borrowed capital can be different depending upon various online forex brokers but AAFX provide up to 2000:1 leverage ratio which means that two thousand times more fund than your original investment. By using leverage ratio you can also increase your profits by 2,000 times. However, you should also keep in mind that currency trading in United Kingdom by using leverage ratio can also enhance profit potential and risk as well, and you should be able to manage your risk.
How to use leverage Ratios
Consider you are currency trading in United Kingdom, and you have the same 1,000 dollar in your live trading account. Moreover, you predict that the Euro will rise against the US dollar. Therefore, you decided to use leverage ratios to get maximum borrowed capital. The current EUR/USD ratio is at 1.35, and you trade 2,000,000 dollar for 1,481,481 euro. At the end of day euro rises to 1.36 and you exchange euro for dollars which means that you will get $ 2,014,814. Furthermore, after returning the borrowed capital to the broker and subtracting the deposit your profit from this specific trade will be $ 13, 814 dollar.
In the above stated example your prediction about the Euros is correct however, incase if your prediction did not come true and instead of increasing the Euros would have decreased then what would have happen. In this scenario, your trade would remain open until your losses will be equal to initial deposit which is $ 1,000 at this stage your trade will be closed automatically and the online forex broker will take back the capital or loan.
In short, you can see how the leverage ratios can be helpful in increasing the net profits if you are able to take correct decisions. On the other hand, using incorrectly can result in heavy losses instead of increasing profits.
Why AAFX Trading?
AAFX Trading in an online forex that works towards increasing customer satisfaction and AAFX offers the best leverage ratios to all traders and it take the lowest spread from a trade giving you maximum profit potential.