Hello everyone! I would like to say first of all that this website has really helped me better understand the Forex world and beyond that it has even given me a thirst for learning more everyday. It's like it's never enough knowledge and I suppose that the more you learn the greater your chance of success is. While I have learned quite some useful information these last 6 months (that's when I started learning) I am not yet ready to swim in the pool for the first time and still have some questions that need to be answered. For instance, leverage still seems a vague subject to me.
Perhaps my lack of understanding is not so much focused on the definition of leverage but more on it's actual everyday use. How is it that leverage happens? If someone could tell me every steps of the way that would help. I think that some example (not theoretical) of the steps one needs to take to enter a trade would help me. I have been trading on a demo account now for about the same time I started learning. As you have probably guessed I am now way better than what I used to be. But still, to succeed in Forex you need to have a proper system and stick to your rules and more importantly you need good money management. I have done the first part, now before even thinking of investing one cent, I need to be crystal clear on the second part.
I would appreciate if someone could tell me precisely how leverage is used. For example, a guy name Peter decides to open an account and puts 10 000 $ in it. He decides he wants to use some leverage and therefore uses a 10:1 to open a standard account.
Right there I need to understand something. Is this chosen before opening an account? Or leverage can be changed later on? My other question is since Peter only has 10 000 and takes a 10:1 leverage his account would now have 100 000. But the margin cost for such leverage is 10% thus his initial 10 000$. Therefore how can he even perform any operation if his usable margin is 0$ (used margin is 10 000$)?
I know that this must be very confusing for all of you and perhaps I'm explaining it so badly that I'm the only one that can understand it in my head. I'm sure that there must be something that I'm not doing right if someone could just enlighten me that would be great!
Thanks to all of you for your time! Hope I can get this question answered...
forex_champion