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

    1. The use of various financial instruments or borrowed capital, ...
  2. Leverage Build Up

    The accumulation of additional debt to enter a position that ...
  3. Trading Margin Excess

    The funds that remain in a margin trading account that are available ...
  4. Leveraged ETF

    An exchange-traded fund (ETF) that uses financial derivatives ...
  5. Net Leverage

    The sum of an insurance company’s net premiums written ratio ...
  6. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company ...
Related Articles
  1. Trading

    How Much Leverage Is Right for You in Forex Trades

    It isn’t economics or global finance that trip up first-time forex traders. Instead, a basic lack of knowledge on how to use leverage is at the root of trading losses.
  2. Investing

    Leverage: Is It Good for Your Portfolio?

    Discover the concept of financial leverage. Learn multiple ways to get leverage in your portfolio, and decide if leverage is a good idea for you.
  3. Trading

    Adding Leverage To Your Forex Trading

    The use of margin to trade in the foreign exchange market can magnify profit opportunities.
  4. Trading

    Forex Leverage: A Double-Edged Sword

    Find out how this flexible and customizable tool magnifies both gains and losses.
  5. Investing

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

    Learn to cut out losses quickly, leaving profits room to grow.
  6. Trading

    Top Reasons Forex Traders Fail

    This market can be treacherous for unprepared investors. Find out how to avoid the mistakes that keep FX traders from succeeding.
  7. Personal Finance

    Borrowing Smart In A Debt-Filled World

    Leveraging your money can have many perks, but it's not always the smartest financial plan.
  8. Trading

    How Leverage Is Used In Forex Trading

    Forex trading by retail investors has grown by leaps and bounds in recent years, thanks to the proliferation of online trading platforms and the availability of cheap credit. The use of leverage ...
  9. Investing

    Explaining Leveraged Loans

    Leveraged loans are loans extended to companies or people who already have large amounts of debt.
  10. Investing

    4 Mistakes to Avoid When Trading Leveraged ETFs

    Learn the common mistakes made with leveraged ETFs, and discover how you can lose money even if you are right on the direction of a market sector.
RELATED FAQS
  1. How does leverage work in the forex market?

    The concept of leverage is used by both investors and companies. Investors use leverage to significantly increase the returns ... Read Answer >>
  2. Besides operating leverage, what are other important forms of leverage for businesses?

    Learn about what other forms of leverage exist for businesses besides operational leverage, and the primary leverage metrics ... Read Answer >>
  3. What are the risks of having both high operating leverage and high financial leverage?

    In finance, the term leverage arises often. Both investors and companies employ leverage to generate greater returns on their ... Read Answer >>
  4. What methods can be used to fund a forex account?

    The forex market is where currencies from around the world are traded. In the past, currency trading was limited to certain ... Read Answer >>
  5. Can mutual funds use leverage?

    Learn about what types of mutual funds use leverage, how leverage can increase returns and what restrictions are in place ... Read Answer >>
  6. How do leverage ratios help to regulate how much banks lend or invest?

    Learn what leverage ratios mean for banks, how regulators restrict leverage, and what impact ratios have on a bank's ability ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center