Maximum Leverage

AAA

DEFINITION of 'Maximum Leverage '

The maximum size of a trading position permitted through a leveraged account. Typical leverage available on currency trades through forex trading institutions ranges from 50 to 400 times. With a leverage ratio of 50, an individual with a margin deposit of $5,000 can initiate a trading position of up to $250,000.

BREAKING DOWN 'Maximum Leverage '

Exceeding or even getting close to the maximum leverage point can be an untenable situation for forex traders, since a small price movement can quickly wipe out the entire amount of equity in the trading account.

RELATED TERMS
  1. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company ...
  2. Multinomial Distribution

    A distribution that shows the likelihood of the possible results ...
  3. Homemade Leverage

    A substitution of risks that investors may undergo in order to ...
  4. Deleverage

    A company's attempt to decrease its financial leverage. The best ...
  5. Operating Leverage

    A measurement of the degree to which a firm or project incurs ...
  6. Leverage

    1. The use of various financial instruments or borrowed capital, ...
Related Articles
  1. Forex Education

    Forex Leverage: A Double-Edged Sword

    Find out how this flexible and customizable tool magnifies both gains and losses.
  2. Forex Education

    Adding Leverage To Your Forex Trading

    The use of margin to trade in the foreign exchange market can magnify profit opportunities.
  3. Forex Education

    Leverage's "Double-Edged Sword" Need Not Cut Deep

    Learn to cut out losses quickly, leaving profits room to grow.
  4. Investing Basics

    Why do Debt to Equity Ratios Vary From Industry to Industry?

    Obtain a better understanding of the debt/equity ratio, and learn why this fundamental financial metric varies significantly between industries.
  5. Stock Analysis

    How Rollins Inc. Transformed from Radio to Pest Control

    Discover how Rollins, Inc. grew and expanded, making numerous acquisitions, transitioning from the radio industry to the pest control industry.
  6. Term

    Understanding the Maintenance Margin

    A maintenance margin is the minimum amount of equity that must be kept in a margin account.
  7. Technical Indicators

    Key Financial Ratios to Analyze Investment Banks

    Find out which financial ratios are most useful when analyzing an investment bank, and why tracking capital efficiency is especially important.
  8. Professionals

    Career Advice: Management Consulting Vs. Private Equity

    Compare the career paths of management consulting and private equity, using criteria such as skills needed, starting salary and work-life balance.
  9. Trading Strategies

    Financial Ratios to Spot Companies Headed for Bankruptcy

    Obtain information about specific financial ratios investors should monitor to get early warnings about companies potentially headed for bankruptcy.
  10. Brokers

    10 Most Famous Public Companies That Went Private

    Here’s a list of the most popular listed companies that went private in recent decades.
RELATED FAQS
  1. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  2. Are there leveraged ETFs that follow the retail sector?

    There are many exchange-traded funds (ETFs) that track the retail sector or elements of the retail sector, and some of those ... Read Full Answer >>
  3. What are some common cash-debt strategies that occur during a spinoff?

    Cash-debt strategies that are commonly used to in a spinoff to enable the parent company to monetize the spinoff are debt/equity ... Read Full Answer >>
  4. What are the similarities and differences between the savings and loan (S&L) crisis ...

    The savings and loan crisis and the subprime mortgage crisis both began with banks creating new profit centers following ... Read Full Answer >>
  5. How can I determine the degree of financial leverage (DFL) for a particular company?

    Fundamental analysis uses the degree of operating leverage (DFL) to determine the sensitivity of a company's earnings per ... Read Full Answer >>
  6. Why should investors be wary of off balance sheet financing activities?

    Investors should be wary of companies that rely heavily on off-balance-sheet financing because it may make those businesses ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  2. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  3. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  4. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  5. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  6. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!