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. 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.
  5. Term

    Understanding the Maintenance Margin

    A maintenance margin is the minimum amount of equity that must be kept in a margin account.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. Mutual Funds & ETFs

    ETF Analysis: Direxion Small Cap Bull 3X

    Read about a triple-leveraged exchange-traded fund that aims for 300% of the returns of the Russell 2000 Index: the Direxion Small Cap Bull 3X.
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. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  2. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  3. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  4. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  5. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  6. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
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!