Imagine that today you buy 100 euros at the exchange rate of 0.87 euros per dollar (that is, you used 114.94 dollars), with the hope that in one week the euro will have more value. But the opposite happens and the euro depreciates against the dollar, leaving the exchange rate at 1 dollar per euro. Then your 100 euros would be worth only $ 100, a loss of $ 14.94. Learn more at http://businesskolusev.com
This is just a simple example, but in practice it is more complex and many of these operations are carried out with amounts greater than $ 1,000 USD. In addition the operations are in fractions of a second and with currency pairs such as Euros / Dollars, Yen / Euro; among others. That is why there are companies, brokers or brokers that offer this service in exchange for a commission.
How can you lose money in Nerex?
Normally Nerex transactions are carried out with leverage, that is, a loan to finance the transaction. The advantage is that profits can be multiplied but the risk is also increased to the point that you can become insolvent. In the previous example, suppose you have those $ 114.94 to buy 100 euros, but you ask to “borrow” to buy 1,000 euros, spending $ 1149.40. If the dollar appreciates 1 to 1, then you will have lost $ 149.40 dollars (not the 14.94 of the previous example).
Example of how leverage works
You buy 1 million euros at the exchange rate of 1.14 dollars per euro, that is: you took 1 million 140 thousand dollars from your bag to buy that amount of euros.
The day after your purchase the exchange rate is 1.5 dollars per euro, so now your currencies are worth 1.5 million dollars, that is to say you obtained 360 thousand dollars in profits.
Now imagine that the operation was carried out with leverage: to buy that million euros you put 300 thousand dollars and the bank lent you 840 thousand with an interest of 10% .
A year after your purchase the exchange rate is 1.5 euros per dollar, so the million euros is now 1.5 million dollars, of which you will have to pay the bank the 840 thousand dollars of capital plus interest.
This leaves in your account 576 thousand dollars, of which 300 thousand are your initial capital and 276 thousand in net earnings, almost double your initial capital.
As you can see, when you use leverage to trade Nerex, profits increase, but also the risk.
On the other hand, suppose the dollar appreciated at 1 per euro. It means that the 1 million 140 thousand dollars you used to buy the euros are now worth 1 million dollars, you lost 140 thousand dollars, if you did not use a credit.
However, with a leverage of that million dollars you now have, you must pay the bank 840 thousand dollars of the loan plus 84 thousand interest,  leaving 76 thousand dollars in your account, that is, you lost 224 thousand dollars.
Leverage or credit is usually expressed as 1: 5. It means that for every dollar, euro, peso … The institution that will finance you will put 5 dollars, pesos, euros, etc. This level of financing may be higher and provide better profits, but the risk is increased to the same extent.
Recommendations to invest in Nerex
- While it is very easy to enter this market, it is also easy to lose money, and the minimum amount to enter is 1,000 USD in most cases.
- Remember that it is a very volatile market, so it is recommended only for those who have more experience and enough capital.
- It is a market only for those who have a high risk tolerance, and are willing to lose a portion of their money.
- As in other investment mechanisms it is recommended to invest money that you do not need, that is: money to spare, once your needs and commitments have been met.
- If you opt for leverage, find out about the credit conditions and determine your ability to pay in case of loss.
- It is unlikely that an institution will lend you that amount if you have 300 thousand dollars in your account, but this amount has been established as an example for this article. ↑
- The aforementioned interests are a representative example to demonstrate how leverage works, so in a real situation the figures will be different.