You don’t have to worry about the market’s internal functioning because the trader controls everything. As such, you can be sure you will get the correct price information without waiting for any announcements or statements from the central bank. However, this type of leverage is not recommended if you don’t have complete confidence in the market data.
Indirect leverage is less risky than direct forex trading but can still be expensive. Here, you will have to pay a commission to a brokerage firm per trade, ranging from a few dollars to a few thousand dollars. It means the trader will pay the trades and brokerage fee.
This type of leverage can reduce your profits, depending on how volatile the market is, and can sometimes even lead to the trader losing his money because of market inefficiencies. If used correctly, there is no downside to indirect leverage.
Forex traders use various types of leverage, depending on the forex market’s situation at a particular moment. Some traders stick to the traditional ‘buy-and-hold strategy, meaning they do not trade very often and thus do not require much leverage.
Some traders believe that how much leverage a trader applies is not important. What is more important is how a trader uses that leverage. Other traders like to make a quick profit from small profit moves in the market; they, therefore, apply large leverage. These types of forex traders prefer to use both kinds of leverage and are often known as swing traders.