CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63.21 % of retail investors lose their capital when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Leverage is a trading tool that allows traders to open trading positions of much higher volume. In simple terms, and with a bit of exaggeration, it is a kind of borrowing of funds that starts when a trading position is opened and ends when it is closed. Unlike loans, which are a pretty straightforward concept, there is no need for ongoing repayment and no ramping up of interest with leverage. Leverage only involves the payment of so-called swaps (overnight holding fees), which are not necessarily a cost but can also be an additional profit for traders (depending on whether the swap charged is positive or negative). However, if you do not plan to keep your trading position open overnight, you do not need to bother with swaps at all.
The size of the leverage directly affects the maximum size of the position that the trader can open. For example, if a trader is given a leverage ratio of 1:30, then this means that with this ratio the trader can open a trading position with a volume 30 times higher than the amount he is investing.
As an EU regulated broker, Purple Trading can offer a maximum leverage of 1:30 for retail clients.
A professional trader is about to open a position in which he is willing to invest $1000. He uses the 1:500 leverage in his professional account (Based on CySEC and ESMA regulations, this leverage is not available to an ordinary retail client, but can be used by professional clients). Thus, thanks to the leverage, a trader with USD 1,000 can open a position of up to 500 times the size of his deposit (i.e. USD 500,000). If a trader decided not to use the leverage, he could only open a position of the size of his deposit, in this case USD 1,000.
In this ebook you will find explanation of basic terms and concepts in Forex trading, demonstrations of basic price formations on a chart and how to trade them, recommendations for appropriate trading support tools and much more!
This is the maximum leverage available (e.g. 1:30) in the event that position(s) of the maximum possible volume are opened.
The leverage that a trader uses in real terms when his financial account is not 100% encumbered by open trades. This means that if a trader has, for example, only one position "EURUSD" with a volume of 0.01lot (1000USD) open in a dollar trading account, then the size of the real leverage is 1:1.
Leverage has its pros and cons and can pose a significant risk, especially for beginner traders, if used incorrectly.
No. Under new European regulations, it is not possible for retail client accounts to have negative balance, which means that, in the event of unfavorable market conditions, brokerage firms must ensure that trading positions are closed before the trading account reaches a negative value (in the event that the account gets into negative, then the trader is not obliged to compensate for this negative balance).
Trading with leverage brings with it both benefits in the form of potentially higher appreciation and/or the risk of possible higher losses. It is therefore not clear whether it is more advantageous to trade with or without financial leverage.
Can I test the leverage on a demo account?
Yes, the Purple Trading demo account offers the possibility to try out leverage, either in ESMA regulated leverage mode (max. 1:30) or as any leverage identical to the settings for professional clients (up to 1:500).
No, it doesn't have to be that way. It is always necessary to be well acquainted with the business conditions of the brokerage company, as it can provide different amounts of financial leverage on different instruments within its offer. See the leverage conditions for Purple Trading
Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary, and does not constitute investment advice. L.F. Investment Limited. will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
The content on this website is subject to change at any time without notice, and is provided for the sole purpose of assisting traders to make independent investment decisions. L.F. Investment Limited has taken reasonable measures to ensure the accuracy of the information on the website, however, does not guarantee its accuracy, and will not accept liability for any loss or damage which may arise directly or indirectly from the content or your inability to access the website, for any delay in or failure of the transmission or the receipt of any instruction or notifications sent through this website.
At this time L.F. Investment Limited cannot and will not accept clients from outside European Economic Area and from Belgium, Switzerland and USA. You need to be 18 years old or legal age as determined by the laws of the country where you live in order to become our client.
Our payment providers are TrustPay, a.s. authorised and regulated by the National Bank of Slovakia and Emerchantpay Ltd. which is authorised and regulated by the Financial Services Authority (FCA) of the United Kingdom. Our Electronic money institution is Cardpay authorized by Central Bank of Cyprus.
Purple Trading is a Cypriot national trademark (no. 85981), National UK trade mark (no. UK00003696619) and European Union trade mark (no. 018332329) owned and operated by L.F. Investment Limited, 11, Louki Akrita, CY-4044 Limassol, Cyprus, a licensed Cyprus Investment Firm regulated by the CySEC lic. no. 271/15. The company is legally obligated to follow all laws of Cyprus and rules and conditions of its CySEC license. The subsidiary of L.F. Investment Ltd, LFA International Ltd., Aiolou & Panagioti Diomidous 9, Katholiki, 3020, Limassol, Cyprus, registration number: HE422638 is responsible for card processing.
CFDs with underlying asset a virtual currency pair are complex, extremely risky, and usually highly speculative and entail a high risk of losing all the invested capital and therefore are not appropriate for all investors. The values of virtual currencies values are subject to extreme price volatility and therefore may result in significant loss over a short period of time. Clients should not engage in trading in CFDs with underlying asset a virtual currency pair unless they have the necessary knowledge in this specific product; or if they can bear the loss of the entire invested amount. For more details please see the Risk Warnings and Disclosures.