For a stock trader there are not less challenges in the market. One needs to have sharp eye on the market, his trades and at the same time the service providers for trading services also. The market has ample number of service providers as far as the trading services are concerned but all of them may not fit to your trading requirements. Hence as a trader you need to find one who can offer the services at low rate of brokerage and also offer high leverage.
How does the leverage matter?
For the trader it is necessary to get more exposure to the amount of his margin money. This can help him go for more volume which can lead to hire profit also. The high leverage stock brokers can prove much useful if the trader aims at high volume trading at restricted margin money. Every broker in the market has some standard set of rules as far as the exposure is concerned. This standard varies from broker to broker and firm to firm. One needs to check the amount of exposure to the margin money before going for the trading services with a particular broker.
In the share market one can see that every broker has different practice when it comes to offering the exposure. Some of them offer 10 times while a few also go up to 20 times. One needs to understand the difference in a better way with the help of an example. If one pays 10000 as margin money and the broker offers 10 times exposure he can go for the stock purchase up to 100000. With the stock of 100000 suppose one makes 5% profit which comes to be 5000. Now if the broker offers 20 times exposure than the credit will be of 200000. It means now one can buy the stock of 200000 and on that if one makes 5% profit he can earn 10000 from the market. Hence the trader can have more benefit if the exposure offered is higher.
Why more exposure is not allowed by many brokers?
Usually, the brokers do not allow high exposure until they are satisfied with the skills of trader and his financial stability. The moment one is provided with high exposure one starts trading in bulk and if there is anything wrong he may have to suffer huge loss also. Such a huge loss can be troublesome to the trader as well as broker. Hence to save the trader and self, the brokers do not prefer to offer high exposure. Here one needs to note that if the collateral is provided the brokers do not hesitate to offer more exposure also. For the veteran traders it may be a game to have high exposure to their margin money but for a new trader this limit can be much useful. In the market one can find some brokers who practice high exposure to have more benefits from the client also.