What is Leverage and Payoff? Definition and Meaning with Example

Leverage Definition:

Leverage means simply borrowing used for finance an operation. As simple as that! That is, instead of performing an operation with its own funds will be done with equity and credit. The main advantage is that you can multiply the profitability and the main drawback is that the operation did not go well and end up being insolvent.

In other words, leverage in any financial market allows traders to take much larger positions than are normally available from your cash balance. This increases the potential for great benefits but also increases the risk. In the forex market, leverage is needed for most traders to make a meaningful life, because exchange rates often fluctuate in fractions of a money. To qualify for as little as one-hundredth of one per paisa extent, you must have large amounts of currency. Nearly all forex brokers extend high leverage its customers to facilitate business experience.

Know the Leverage:

The degree of leverage available to Forex traders varies by country. In the India, you can trade with a leverage of 50: 1, meaning that multiply its cash balance by 50 to determine the purchasing power of their own. Therefore, a Forex account can trade at Rs. 20,000 for Rs. 1 million in foreign currency. To determine the number of units of one currency that can be purchased, multiply the amount of money to be used in trade by 50, and then divide by the exchange rate.

Wiki Finance pedia - e-learning course on Futures Trading Wikipedia Chapter - What is Leverage and Payoff Definition and Meaning with ExampleAlthough not usually have the opportunity to apply lower leverage in a brokerage account, you can open special accounts Forex offering smaller position sizes. If you are new to forex trading, you should consider micro accounts, which allow you to trade positions only 1,000 units. The amount of money needed to open and operate a micro account is usually less than Rs. 100, and is a way to learn Forex trading without taking excessive risks.

Payoff Definition:                   

Payoffs are the monetary awards are given for a variety of reasons. Examples are achieving quality performance, meeting sales goals, being exceptional in a certain situation, or the delivery of a special project. Some of the usual payoffs are money as a bonus, the company paid travel, gifts from a catalog of rewards, or services such as cell phone or cable paid.

Other Types of Payoff:

The non-monetary rewards are given for going beyond a team player, perfect, or learn some new skills assistance. Examples of non-monetary rewards are movie tickets, coupons, certificates restaurant, thanks for the heads, flexible hours, a day, picnics, recognizing birthdays and free lunches.

Other types of rewards can also be given to employees. Examples include a parking space, the projecting plate employee, corner space offices, personalized items (briefcases, diaries), shirts, jackets, and employee discounts. Regardless of the type of rewards given, be consistent and fair in delivering the rewards program.

Payoff programs are impassive programs that can help boost the morale of employees. They are designed to reward and recognize employees for their hard work and accomplishments at work. They can show appreciation by employers for their employee’s dedication and commitment. To be rewarded and recognized for their efforts creates happy employees often perform better in their jobs and are more motivated to give more than expected. In addition to providing a lift to existing employees, it rewards recognition program can also be used as a marketing tool to attract new employees.

Read Free Tutorial Course - Basics of Futures Trading for Beginners

» e-Learning Chapter 1: What is Futures Contract and Types of Future Contracts?

» e-Learning Chapter 2: What is Futures Trade and How to Trade in Future Markets?

» Currently Reading: What is Leverage and Payoff? Definition with Example.

» e-Learning Chapter 4: What is Shorting or Short Sale? Definition and Rules.

» e-Learning Chapter 5: What is Nifty Futures and How to Trade in Nifty futures?

» e-Learning Chapter 6: What are Futures Prices? Definition and Effects of Dividends.

» e-Learning Chapter 7: What is Hedging? Examples and Hedging Strategies.

» e-Learning Chapter 8: What is Open Interest? Examples and Analysis.

» e-Learning Chapter 9: What is Margin and M2M (Mark to Market)?

» e-Learning Chapter 10: What is Margin Trading? Advantages and Risk of Leverage.

» e-Learning Chapter 11: What is Hedger, Speculator and Margin Calculation?

» e-Learning Chapter 12: Futures Trading Quiz – Basics of Futures Trading for Beginners.

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