Leverage
The use of borrowed capital, such as margin, to increase the potential return of an investment. In FX it allows traders to open a much larger position with a smaller amount of actual capital.
Related terms
Margin
A deposit required to open and maintain a position, such as a forward contract or option. Margin serves as collateral to secure the transaction and protect against counterparty default risk.
Read full definitionGearing Ratio
A financial ratio comparing owner’s equity (or capital) to the company’s debt and borrowed funds. It measures financial leverage, showing how much of a firm’s operations are funded by equity capital versus debt financing.
Read full definitionInitial Margin
The deposit required to open a position, usually expressed as a percentage of the total trade value. A trader seeking £100,000 of FX exposure might post £10,000 as a 10% initial margin requirement while still gaining the full exposure.
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Aggressive
A description of traders and/or price action acting with conviction.
Read full definitionArbitrage
The simultaneous buying and selling of the same currency in different markets to profit from small price differences. The strategy exploits temporary inefficiencies in FX markets.
Read full definitionAt Best
An instruction given to a dealer to buy or sell at the best rate that can be obtained at a specific time.
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An instruction given to a dealer to buy or sell at a specific price or better.
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A third party coordinating the sale of financial securities between sellers and buyers. Exchanges only accept orders from their members, so traders and investors use brokers as intermediaries; brokers are compensated through commissions, fees or payment from the exchange.
Read full definitionBulls
Traders who expect prices to rise and who may be holding long positions.
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