Small movement in the price of the commodity can bring big profit. In other words, if you want to buy for example 100 troy ounces of gold, you are able to do so only with the composition of the backup (the so-called margin). It is roughly only around $1000! Or, if you want to buy 5,000 bushels of wheat, all you have to deposit around $900! With this phenomenon, we can not buy or sell something at full price, but make only a minimum deposit (margin). There is not any other business that would offer something like that! Let us therefore now show a few examples of the.
Let’s take advantage of the phenomenon described by leverage a concrete example of currency trading. Imagine that you want to speculate on the movement of the euro. Based on your technical analysis expect that the price of the euro will grow – So you want to buy euro now, so it can later sell at a profit. But you know a lot of informations got from the newspapers or TV. To earn a good buck movement, we would have to invest millions or buy tens and hundreds of thousands of Euro, and only in this case, if the price of the euro moves up. But where from to take millions of Euros to invest in currency trading. Weighing in commodity trading never require hundreds of millions of Euros!
Minimum “standardized” contract of euro in commodity exchange is the “Euro pack”, worth 125,000 euros. If you decide to buy one euro contract package, it is actually buying the currency. The 125,000 Euros are equal to 3,750,000 crowns. Now imagine that the purchase of such contract simply requires a small deposit or margin – not 70% of the price, or 50% or even 25%, but only for about 3200 U.S. dollars (in the case of transactions undertaken throughout the course of one day’s deposit is often significantly less – around $1000!). If the Euro really grows, then you will be credited to the account of profit. If the Euro goes in the right direction by only one cent, we earned $1,250!