If you are a forex trader to consider one of these '400-1 leverage offered, you should know first:
The first rules of the game you're going to play.
If the second the influence of the Forex and how it works, not for you, but for brokers.
How it works:
The lever can be useful, but it can be your worst enemy.400-1 means that U.S. $ 1000 can control a $ 400,000 position say against the yen. This is great, but it also means that even a small movement towards your position can wipe your account clean. This is obviously very bad news for you, but good news for brokers!
Why is good news for them?
Well, the first thing that traders should be aware that companies make their Forex markets - are bid and ask customers. Using the assumption that as most highly leveraged speculators lose then it's a good deal to take the opposite position to them.
This happens automatically, so that when a customer buys U.S. dollar against the yen, the broker sells short the dollar.When the client covers the position (either a gain or loss) is paying the broker as well. If the client wins the broker loses and vice versa. This is how the game is played lever.
So, do what we usually think that winning in this game? No, not you. And 'the broker game statistics and the statistics say highly leveraged speculators lose.
Ok then. If the broker to win when you lose a customer, is the best way to ensure that clients lose ?
Simple, get them to buy large positions in a limited amount of capital so that the quotas for the best and most talented players are more or less - ZERO.
Why do you think ads for '400-1 leverage 'are scattered through the websites of brokers? They'll sell you the supposed "advantage" when, in turn, the reality is that the only "advantage" for them.
If you want to play leverage in Forex, understand how the game works. The game basically works this way: The broker is the shark. The retail trader is the food of sharks. If you are serious in trying to make money in foreign currency business - educate yourself about the risks.