The Deriv multiplicator explained: How to use leverage

What would happen if you multiplied the potential of gaining profits? That would allow you to stay ahead in your trading game. When it comes to leveraged trading, people often encounter the chances of high losses. 

However, a multiplicator or multiplier shall come in as aid for you there. Not many brokers offer you to trade with leverage. So seldom comes the need to use a multiplikator there. However, with Deriv, you can get involved in leveraged trading and reduce the chances of losses with its multipliers. Here we shall know all about the leverage and its usage in trading, along with the use of Deriv Multiplicators.

What does leverage signify?

The term leverage is nothing but a result of borrowed capital in the financial world. Leverage may arise when you use the borrowed capital to fund and expand the company. We can see it as an investment strategy that utilizes borrowed funds. It particularly aims at increasing the potential return of a particular investment.

The term leverage also signifies the debt amount that a company uses to fund its assets.

Leverage proves to be advantageous to the traders by increasing their buying capacity in the market. Moreover, many companies prefer to use it instead of issuing stock or raising capital. The borrowed debt can equally serve to increase the value of the shareholder.

While you undertake an investment project, leverage can serve you best. You can simply amplify the potential returns from that particular project. The only difference will be the use of leverage in it. But, as a new trader, you must not get carried away with the fancy trading terms. 

Often, a term can come with a duality that can give you instant results and instant losses. Such a thing is possible with leverage as well. Though it can be highly beneficial, it can also induce higher chances of losses. The downside of using leverage is that as it multiplies the potential gains, it also multiplies the losses. Moreover, when we hear a company be ‘highly leveraged,’ that does not mean a positive indication. Such a company essentially signifies a greater debt than equity.

Understanding leverage

Leverage becomes a crucial part of CFD trading. Especially when you trade forex on Deriv, knowing about leverage is essential. We can understand leverage as using borrowed funds so that it helps increase your trading position. It may help you reach beyond the limit of your cash balance. What you cannot achieve with your cash balance is possible only if you use leverage. Deriv is a broker that allows leverage-like trading through its multipliers. 

Leverage provides an added advantage to traders by allowing them to improve their strategies. They can expect a potential profit maximization easily by doing so.

However, as we stated before, leverage is not a single-shot pill that will result in instant profits. It acts as a double-edged sword. The more leverage you use; the greater loss might arise than you anticipate. However, that is subject to poor leverage use. 

How to use leverage and minimize the risks?

Leveraged trading comes with an inherent risk factor. It does not matter if you have a reliable broker like Deriv. If you don’t use it strategically, you will lose majorly.

The best way to use leverage while minimizing the risks is through stop-loss and take-profit. It is one of the standard risk management features available with various platforms, including Deriv.

To place a stop-loss order, the trader must mention the price further, which the trades shall automatically stop. So, if you set a stop-loss limit, then when your trades start falling below that price, they will close automatically and prevent further losses. This feature shall help you secure the profit if you are trading with leverage especially.

Deriv leverage/multiplikators

The concept of leverage is not new among traders and companies. Many traders can increase their returns significantly through the use of leverage. That is why many brokers offer the use of leverage through their platforms. Deriv also provides its clients the chance to utilize leverage while they trade. They can use it through Deriv’s indigenous platforms, Deriv X and Deriv DMT5.

The traders can leverage while using numerous instruments with Deriv. It offers access to more than 50 currency pairs with leverage that extends up to 1:1000. Besides Forex, Deriv also allows leverage trading with stock indices, commodities, synthetic indices, etc. It also allows leverage trading with cryptocurrencies.

Benefits of multipliers/multiplicators

• Enhances the trades

A higher multiplier will mean only higher potential profits, unlike leverage, which suggests a higher loss when you add a multiplier.

• Risk limitation

The Deriv multipliers allow you to use the automatic stop-out function. So, you can limit the risks of losing anything on your stake.

• Trade from anywhere

The multipliers from Deriv are available on desktops as well as smartphones. You can use them through the Deriv Go app on your smartphone at your convenience.

How to change leverage on the Deriv account? 

If you wonder how to change the leverage, you should know that it is set to default. Upon the creation of the account, the leverage becomes final.

Also, it may differ from country to country. 

Conclusion – Leverage can bring many benefits to traders

Higher leverage means that you need to use a low amount of capital to trade. However, it also comes with multiplied risks and you can use Deriv without leverage. Though it can boost purchasing capacity, it highly depends on your strategies. So, you can utilize the Deriv multipliers to trade similar to a leveraged trade. It will reduce the chances of risks and give you similar benefits.