Why do Forex brokers offer insane leverage?

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  • Why do Forex brokers offer insane leverage?

    A leverage of 500:1 for example means that a person can open up a $500,000 position with an initial deposit of $1,000.

    I believe it's crazy that a broker would lend us traders that humongous amount, I mean if we lose the trade, we only lose 1K but the broker will lose 500K! So I think a more realistic approach by the broker is to pool up people's money until it gets to $500,000 , and then put it in the market. But then again, wouldn't this take too long? What if there is insufficient amount to put in because not many ppl are trading?

    Or are all these just illusion and that the brokers are actually running a bucket shop? Like, the broker never actually put your money directly into the market, everything is just virtual?

    Anybody know why really the brokers offer such leverage?
    Last edited by MaRCELO; 04-18-2012, 17:48 PM.
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  • #2
    Perhaps its all BS or go ask on a forex forum.


    • #3
      It is another way of tricking newbies. I had same issue with Exness, as they have unlimited leverage and out of excitement, I joined under them. But, as expected I was cheated and they changed the leverage automatically causing me to face MC, so never get into such tricks!


      • #4
        They are CRAZY!


        • #5
          I believe when you join up with wrong company with wrong intentions, it is too common that we will see such stuff up on the plate. It’s an obvious trick to lure in traders especially newbies. We got to pick companies that have genuine offering not random throws. Exness currently offers unlimited leverage but they are master of deception with changing it on various things costing trader to suffer fair bit!


          • #6
            For Forex trading, you will have to buy at a low price and sell at a higher one. The key to earning high is buying and selling at the right time, which is why signals and brokers can be very beneficial. You must visit Signalskyline to explore the same.


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