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How do I specify Leverage on a Demo Account (Forex)?


Luke-D

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Hi guys. I've got some really basic questions which, after some quick searching, I haven't found the answer to. Every where it's explained seems to presuppose prior or additional knowledge that I'm missing, so please bare with me as I ask really simple questions, or point me to a really, really, take-nothing-for-granted explanation!

I've learned the basics of risk and money management, analysis, and have a simple system I'd like to test in a demo account.
Now it's time to figure out the mechanics of placing trades and punching in the right numbers.
I'm using IG's Workspace. I've started with 9,059 GBP. Now, let's say that I want to place a trade, on, say, USD/JPY and "Buy" at x10 leverage, with a stop loss of 1% my account (90GBP). Alright, let's figure this out:

Firstly, I see three options:
Deal, Order, Alert.

"Deal" seems to be what I want, for placing a regular trade. Correct me if I'm wrong.

Under the "Deal" tab, I've got three options: Size, Stop, and Limit.
For the yen, Size is given in terms of "contracts," where 1 contract = 1000 yen per point. Okay, so I guess I can buy a 10,000 yen position which is equal to 10 points. Am I correct so far?

Now, is this position leveraged? What leverage am I using, and where is that displayed? Is that leverage factored into this price? Also, how do I know how much I am paying for the contract in GBP?  Also, how much is "1 point" on the chart? How can I confirm that I have the right values before placing a trade?

I've watched this video, and it explains none of this: https://www.youtube.com/watch?v=dtodgGPczxU&list=PLOGjoJXp0cmpVNwvNbeAWnH_nu2RaLv4q&index=2

What am I missing?

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1 minute ago, Luke-D said:

Thanks.

It seems that the margin is automatically calculated, and I cannot change it. It seems that leverage is quite high in some cases (35:1 or even 50:1). I want to do long term trades using less leverage so that volatility doesn't come back to bite me. Is there no option to lower this ratio to, say, 10:1 or 20:1?

yes, by lowering the contract/bet size. It will depend on which country you are trading from and which market,

say you are in the UK trading ftse, the regulator has made the min margin requirement  5% which is the equivalent of max leverage of 20:1, as you say the margin is auto calc'd so on the platform fill in a order of deal ticket, adjust the £/point size up and down and look how the amount of margin required changes (amount you must have in your account to fund the trade).

note that the mt4 platform allows a much lower minimum bet size than the online platform but can't trade individual stocks.

 

 

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1 hour ago, Luke-D said:

I think what is confusing me are statements like "The margin is 5%." This means the margin = the money that I supply, on top of which is the broker's money which is not shown? Or does the value in the "Margin" box include the money the broker is lending me?

Moreover, I've heard reference to leverage being an account setting. Is it possible to set the leverage of my demo account to 1:20 rather than 1:50?

the margin and the leverage are the same thing just looked at from different ends, the margin is the fraction of the trades total value that you need to put up to open the trade. so margin to leverage is just % converted to a ratio, 10% margin is leverage of 1:10, 5% margin is leverage of 1:20 and 2% margin is leverage of 1:50. so to go from 1:50 to 1:20 instead of needing to put up 2% of the total you now need to put up 5%. if the trade goes against you and losses start to eat into the margin requirement you will receive a 'margin call' and you will need to either close the trade or add funds, if you do neither the trade will be shut down for you.

You can calc the margin requirement yourself but it's calculated differently for different markets, there is an IG page on this but I can't find it, perhaps @JamesIG, can check as the page linked below has a link to 'how margin is calculated' but the link just takes you back to the top of the same page.

https://www.ig.com/uk/charges/margin#

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2 hours ago, Luke-D said:

Hi guys. I've got some really basic questions which, after some quick searching, I haven't found the answer to. Every where it's explained seems to presuppose prior or additional knowledge that I'm missing, so please bare with me as I ask really simple questions, or point me to a really, really, take-nothing-for-granted explanation!

I've learned the basics of risk and money management, analysis, and have a simple system I'd like to test in a demo account.
Now it's time to figure out the mechanics of placing trades and punching in the right numbers.
I'm using IG's Workspace. I've started with 9,059 GBP. Now, let's say that I want to place a trade, on, say, USD/JPY and "Buy" at x10 leverage, with a stop loss of 1% my account (90GBP). Alright, let's figure this out:

Firstly, I see three options:
Deal, Order, Alert.

"Deal" seems to be what I want, for placing a regular trade. Correct me if I'm wrong.

Under the "Deal" tab, I've got three options: Size, Stop, and Limit.
For the yen, Size is given in terms of "contracts," where 1 contract = 1000 yen per point. Okay, so I guess I can buy a 10,000 yen position which is equal to 10 points. Am I correct so far?

Now, is this position leveraged? What leverage am I using, and where is that displayed? Is that leverage factored into this price? Also, how do I know how much I am paying for the contract in GBP?  Also, how much is "1 point" on the chart? How can I confirm that I have the right values before placing a trade?

I've watched this video, and it explains none of this: https://www.youtube.com/watch?v=dtodgGPczxU&list=PLOGjoJXp0cmpVNwvNbeAWnH_nu2RaLv4q&index=2

What am I missing?

Hi, leverage is the amount of margin used, look through the IG Academy (need to be logged in) for more. If you are using all your available margin for a trade you are using all available leverage.

https://www.ig.com/uk/ig-academy/orders-execution-and-leverage/what-is-leverage

The deal ticket is buying 'at market' (instant execution) while the order ticket is for placing a pending order in the market to be activated when a specified price is reached.

Edited by Caseynotes
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Thanks.

It seems that the margin is automatically calculated, and I cannot change it. It seems that leverage is quite high in some cases (35:1 or even 50:1). I want to do long term trades using less leverage so that volatility doesn't come back to bite me. Is there no option to lower this ratio to, say, 10:1 or 20:1?

Link to post
  • 0

I think what is confusing me are statements like "The margin is 5%." This means the margin = the money that I supply, on top of which is the broker's money which is not shown? Or does the value in the "Margin" box include the money the broker is lending me?

Moreover, I've heard reference to leverage being an account setting. Is it possible to set the leverage of my demo account to 1:20 rather than 1:50?

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  • 0
3 hours ago, Caseynotes said:

You can calc the margin requirement yourself but it's calculated differently for different markets, there is an IG page on this but I can't find it, perhaps @JamesIG, can check as the page linked below has a link to 'how margin is calculated' but the link just takes you back to the top of the same page.

https://www.ig.com/uk/charges/margin#

Thanks for flagging caseynotes - this has been fixed now. 

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