The danger of leverage
The Forex Online has some very special characteristics that differences in binary investments. A key is leverage. In Forex online working with very small profit margins. A PIP is the minimum change in the price of a currency pair and are 0.0001 units. With these margins so small it makes clear the need for a very high capital so that the yield worthwhile.
Thus only large investors could operate in the online Forex online market and the small investor would be vetoed in this lucrative business. Of course, that does not interest to brokers so they offer a tool that is a doubleedged sword: leverage.
What is leverage?
It is a kind of loan that the broker makes us so that we can invest in a market clearly designed for higher capital which have small savers. A leverage of 1:100 means that for every euro we have, will be invested hundred. This means that if we have a hundred euros for investment, act as if we had 10,000.
If we get gains, these gains will be the equivalent to having invested 10,000 but here comes the risk. If we lose also lose this equivalent. That is, if we sell below what we bought and we therefore have a loss, this is not the investment for a hundred euros we have done, also multiplied by one hundred.
It is true that we are going to ask for more than we have in the account, but in the blink of an eye, in seconds, we can stay at zero and unable to make further investments.
