Ratio

Comparing Banks by Leverage Ratio for Forex Trading

6 min read

The leverage ratio forex is an important measure of financial strength that banks use to help them maintain their financial stability. It measures the ratio of a bank’s total assets to its total shareholders’ equity. The higher the ratio, the greater the risk. Banks that are well-capitalized generally have a higher leverage ratio than those that are weakly capitalized. This ratio is extremely important for foreign exchange trading since banks can take advantage of market movements using the leverage available to them. Banks with the highest leverage ratios can significantly increase their profits with relatively small amounts of capital invested. However, with higher leverage comes greater risk, so it is important to be aware of the leverage ratio a bank is using to ensure that the potential returns outweigh the risks.