Leverage in forex trading Eastforexcashback relatively typical, take forex trading as an example to explain the specific embodiment of leverage: In forex trading East forex cashback usually find a reliable forex trading company, forexcashbackcalculator then cashback forex a certain deposit (margin) in this company, you can start buying and selling we take the dollar and the yuan as an example the recent exchange rate of the yuan to the dollar is around 6 yuan for 1 dollar we assume that we deposit We assume that the deposit we deposit is 600 cashbackforexbtc and we are trading against the US dollar in foreign exchange assuming that the leverage we choose at this point is 10 times the leverage is 10 times, which means that we can trade 10 times the 600 RMB relative to the deposit we deposit of 600 RMB, 6000 RMB and this type of trading is called leverage we now deposit 600 RMB and choose 10 times the leverage to trade 6000 RMB At the exchange rate of 1 USD = 6 RMB: 6000 RMB = 1000 USD at this point we buy 1000 USD with 6000 RMB. At this point we have $1,000 in our hands that can be exchanged for 6,500 RMB, which means we deposit 600 RMB, and by using 10 times the leverage of the transaction, the benefit is 500 RMB, and our rate of return is 83% 6.5 x 1,000 - -6,000 = 500500 -6000=500500/600=83%But the foreign exchange market movement may not always change as we expectWe are also exposed to the risk of dollar devaluation after buying $1000 Suppose after $1000 arrives, the foreign exchange market dollar devalues and the exchange rate to RMB becomes: $1 = 5.5 RMB At this point we lose the amount of 500 RMB 6000-5.5×1000=500 and the 500 RMB loss will naturally be deducted from our deposit, which then becomes 100 RMB. The greater the leverage we choose, the greater the uncertainty we face. We may get rich overnight, or we may lose our fortune overnight. It is worth mentioning that in the financial crisis of 2008, many investment banks and securities firms collapsed one after another. Among the five major investment banks in the United States, Bear Stearns and Merrill Lynch were acquired by JP Morgan Chase and Bank of America respectively, Lehman Brothers went bankrupt, and Goldman Sachs and Morgan Stanley received financial assistance from the government on condition that they transformed from investment banks to bank holding companies. Behind the collapse of the five major investment banks on Wall Street, the excessive leverage in the use of funds is one of the reasons why the five major investment banks are so unbearable JPMorgan Chases leverage ratio was as high as 28 times, Morgan Stanley was as high as 40 times