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10 trading terms you need to know

If you’re just starting out in trading and reading everything you can in the market, you’re likely to be faced with plenty of jargon and terminology.

  • What’s the chart pattern saying about the behaviour of active market participants at that moment?
  • If a market is trending higher or lower, what’s the probability of a continuation of that trend?
  • A market may have travelled from A to B, but how can we assess the overall quality of the journey?

 

Leverage is the foundation of your trading experience with us. It involves borrowing an amount of money to trade. By placing a small percentage of the total market exposure as margin, it opens up a world of opportunity to speculate or even protect portfolios.

The lower the required initial margin or the deposit on the full market value of the position, the higher the leverage, and vice versa. Leverage differs depending on what instrument you’re trading and what jurisdiction you fall under. We offer all our retail DFSA clients a maximum leverage of up to 30:1, whilst our professional DFSA clients can have a maximum leverage of up to 500:1. 

What leverage of 30:1 means is that for every $1 that you have in your trading account, you can achieve a $30 notional exposure in the forex market. This doesn’t mean a cash balance of $1,000 will force you to enter trades of $30,000 (the maximum leverage possible). Think of trading with leverage as driving a car: you don’t always need to drive at full speed and especially not on a dangerous road.

This is where position sizing is important. Naturally, the scale of leverage our traders use carries varying degrees of risk, so understanding your correct position sizing is important. Higher leverage offers increased market exposure, which can be attractive for those with the experience and skills who can harness this to drive larger swings in profit or loss (P&L), or detrimental to the portfolio of someone new to trading without a risk management plan in place. Read more about how to manage risk and calculate your position"size.

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