Leverage, Trade Rules, FIFO, Lot Sizes?!

Leverage

Leverage is the ability to gear your account into a position greater than your total account margin. For instance, if a trader has $1,000 of margin in his account and he opens a $100,000 position, he leverages his account by 100 times, or 100:1. If he opens a $200,000 position with $1,000 of margin in his account, his leverage is 200 times, or 200:1. Increasing your leverage magnifies both gains and losses. To calculate the leverage used, divide the total value of your open positions by the total margin balance in your account. For example, if you have $10,000 of margin in your account and you open one standard lot of USD/JPY (100,000 units of the base currency) for $100,000, your leverage ratio is 10:1 ($100,000 / $10,000). If you open one standard lot of EUR/USD for $150,000 (100,000 x EURUSD 1.5000) your leverage ratio is 15:1 ($150,000 / $10,000).  (from FxStreet.com)

I really like the way Baby Pips covers leverage!  Go to this link and click "next lesson" on the bottom to go to the next page >> http://www.babypips.com/school/leverage-the-killer.html

FIFO

FIFO is enforced with all USA brokers regulated by USA rules, but most forex brokerages across the globe do not partake in this foolishness.  Any trader should be able to open and close their trades in any order they see fit.

Abbreviation meaning "First In, First Out".

In Forex trading it refers to an order queue structure where all positions opened within a particular currency pair are liquidated (closed) in the order in which they were originally opened.  (from FxStreet.com)

Lot

The standard unit size of a transaction. Typically, one standard lot is equal to 100,000 units of the base currency, 10,000 units if it's a mini lot, or 1,000 units if it's a micro. Some dealers offer the ability to trade in any unit size, down to as little as 1 unit.  (from FxStreet.com)

Currencies in Forex are traded in Lots.
A standard lot size is 100 000 units.
Units refer to the base currency being traded. For example, with USD/CHF the base currency is US dollar, therefore if to trade 1 standard lot of USD/CHF it would be worth $100 000.
Another example: GBP/USD, here the base currency is British Pound(GBP), a standard lot for GBP/USD pair will be worth £100 000.

There are three types of lots (by size):

Standard lots = 100 000 units
Mini lots = 10 000 units
Micro lots = 1000 units.

Mini and micro lots are offered to traders who open mini accounts (on average from $200 to $1000). Standard lot sizes can be traded with larger accounts only (the requirements for a size of standard account vary from broker to broker).

The smaller the lots size traded, the lower will be profits, but also the lower will be losses.

When traders talk about losses, they also use term "risks". Because trading in Forex is as much about losing money as about making money.
Risks in Forex refer to the possibility of losing entire investment while trading. Trading Forex is known as one of the riskiest capital investments.

Returning back to lots:

With every Standard lot traded (100 000 units) a trader risks to lose (or looks to win) $10 per pip. Where Pip is the smallest price increment in the last digit in the rate (e.g. the smallest price change/move).

With every Mini lot traded (10 000 units) a trader risks to lose (or looks to win) $1 per pip.

With each micro lot (1000 units) - $0.10 per pip.

In Forex traders always search for the most efficient ways to limit risks or at least lessen risk effects. For this purpose various risk management and money management strategies are created.

It is impossible to avoid risks in Forex trading. In order to limit risks traders use methods of setting protective stops, trailing stops; use hedging techniques, study scalping strategies, look for the best deals on spreads among brokers etc.

Traders with the best risk management strategy earn the largest profits in Forex. (from forexbeginners.net)

More to come...!