Common Forex Terms/Terminology 2: Leverage Trading: Leverage trading, also known as margin trading, is when investors use their own capital as collateral to amplify their trading positions through financing provided by banks or brokers. It means magnifying the trading capital of investors. The leverage size is generally determined by the bank or broker, and the higher the leverage, the less capital the client needs to provide. For example, if a trader has $1,000 and uses leverage of 500:1, it means they can trade $500,000 worth of forex. Using leverage can increase potential profits for traders but also increases risks, making it a double-edged sword. Margin: In forex trading, margin refers to the funds required by investors when entering into a trading contract. The specific amount of margin depends on the leverage provided by the broker. For example, if a trader wants to trade 1 lot of EUR/USD, which requires a capital of 100,000 euros, and they use leverage of 500:1, they only need to provide a margin of 200 euros to execute the trade. Spread: The difference between the buying and selling prices of a currency pair is called the spread. It is also known as the trading commission and represents the broker's profit and the trading cost for the investor. Technical Analysis: Technical analysis refers to a set of analysis tools and methods used in securities or forex trading to evaluate market price trends and forecast future price movements. Technical analysis is usually based on chart analysis, technical indicators, and historical price data to determine market trends. Different technical analysis tools and methods have their limitations, so traders often use a combination of tools and methods to ensure more accurate trading decisions. It is generally considered a short-term prediction of market prices, but some investors use technical analysis to forecast long-term trends.