Turkey Leverage Rates
Forex leverage is a loan that enables traders to make transactions with more amounts than they already have. Investors and companies use it to increase their profits from a transaction and both the trader and Forex institution get profit.
How Does Leverage Work?
Leverage is mostly used in currency exchanges. During exchange transaction, if exchange rates change, one can profit from these fluctuations. But this profit would be very small when one does not have much on hand. For example without leverage if you exchange your 1000 TRY to USD when USD exchange rate is 3,2 you get 312,5 USD. After that if USD rate increases to 3,5 you can exchange your 312,5 USD for 1093,75 TRY. In the end you would profit 93,75 TRY.
But with leverage, you get more benefits. If you have 1.000 TRY for exchange, Forex gives you 100.000 TRY with 1:100 leverage rate to make the exchange transition. For 100.000 TRY you get 31.250 USD. After the rate fluctuation, you exchange your 31.250 USD again and get 109.375 TRY; 9.375 more than the amount you started with. After the transaction is completed, Forex gets its 99.000 back and leaves you the profit. So you will earn 9.375 profit with only 1.000 deposit.
The Risks of Leverage
Leverage system has its high-risk potentials as well as profits. The risks get higher with the margin put into the transaction, therefore the amount of leverage received. If there is a loss after the transaction, high amount of leverage will mean higher losses for the trader. And as the forex system takes the leverage amount back after the transaction, there is a possibility to lose all the amount one started with at hand and even more.
Leverage Rates in Turkey
In Turkey, the maximum leverage rate is 1:100 for transactions with USD, Euro, TRY and gold. For other investment tools, the maximum leverage rate is 1:50.