“High leverage is what made forex business so lucrative for traders, yet brokers quickly realized that not everybody should be able to trade with high leverage as it ultimately increases risks for traders”, Andrey Kamyshanov, CEO of Brokeree Solutions, commented on the announcement. “Brokeree Solutions aims to become a one-stop shop for forex brokers by providing products with sophisticated functionality that are comfortable to use. Dynamic Margin and Leverage is one example of how sophisticated mundane processes can be simple and straightforward.”
In most cases, brokerages use leverage more for promotional activities than for risk management. As the higher the leverage the more appealing it is for novice traders who are not as keen to allocate tens of thousands of dollars for trading activities. The usage of leverage for risk management is rather straight-forward - as the equity increases, the leverage should be decreasing to prevent clients from experiencing huge losses with high-leveraged positions.
When it comes to margin settings, there are more nuances that should be taken into consideration. Margin requirements and leverage basically speak about the same concept but from a different angle. Margin requirement defines a minimum amount that a trader should allocate to sustain a position. Whereas leverage corresponds to the amount "lent" by the broker to amplify client's position.
One of the common practices would be to increase margin requirements during uncertain market conditions or in anticipation of major news events that can accelerate the volatility of the instrument. With increased margin requirements a trader can enter positions with smaller volume with the same funds therefore overall exposure is limited and the risks are smaller.
These two seemingly simple settings allow brokers to expand their risk management processes and minimize potential losses of their clients that can occur while active trading. Dynamic Margin and Leverage for MetaTrader 4 and 5 provide the required flexibility and robust performance to ensure stable workflow.
Brokeree Solutions is a high-grade technology provider for forex and multi-asset brokers. Established in 2013 the company quickly gained international recognition with its key solutions: Liquidity Bridge, PAMM, and Social Trading. Today, it serves as a one-stop-shop counting over 50 plugins and applications for brokers all over the world seeking to optimize their business, control risks, and ultimately increase earnings.