Trading leverage or leveraged trading allows you to control much larger amounts in a trade, with a minimal deposit in your account. Leveraged trading is also known as margin trading. You can open up a small account with a brokerage, and then essentially borrow money from the broker to open a large position. This allows traders to magnify the amount of profits earned.
The key to creating a successful carry trade strategy is not simply to pair up the currency with the highest interest rate against a currency with the lowest rate. Rather, far more important than the absolute spread itself is the direction of the spread. In order for carry trades to work best, you need to be long in a currency with an interest rate that is in the process of expanding against a currency with a stationary or contracting interest rate. This dynamic can be true if the central bank of the country that you are long in is looking to raise interest rates or if the central bank of the country that you are short in is looking to lower interest rates.
Knowing where interest rates are headed is important in forex trading and requires a good understanding of the underlying economics of the country in question. Generally speaking, countries that are performing very well, with strong growth rates and increasing inflation will probably raise interest rates to tame inflation and control growth. On the flip side, countries that are facing difficult economic conditions ranging from a broad slowdown in demand to a full recession will consider the possibility of reducing interest rates. 
A single pound on Monday could get you 1.19 euros. On Tuesday, 1.20 euros. This tiny change may not seem like a big deal. But think of it on a bigger scale. A large international company may need to pay overseas employees. Imagine what that could do to the bottom line if, like in the example above, simply exchanging one currency for another costs you more depending on when you do it? These few pennies add up quickly. In both cases, you—as a traveler or a business owner—may want to hold your money until the forex exchange rate is more favorable.
Finally, it is important to note that in leveraged forex trading, margin privileges are extended to traders in good faith as a way to facilitate more efficient trading of currencies. As such, it is essential that traders maintain at least the minimum margin requirements for all open positions at all times in order to avoid any unexpected liquidation of trading positions.

To trade $100,000 of currency, with a margin of 1%, an investor will only have to deposit $1,000 into her or his margin account. The leverage provided on a trade like this is 100:1. Leverage of this size is significantly larger than the 2:1 leverage commonly provided on equities and the 15:1 leverage provided in the futures market. Although 100:1 leverage may seem extremely risky, the risk is significantly less when you consider that currency prices usually change by less than 1% during intraday trading (trading within one day). If currencies fluctuated as much as equities, brokers would not be able to provide as much leverage.
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