A multiplier is a useful, yet dangerous tool that can help traders increase the potential upside of their deals and control positions that greatly exceed the funds at their disposal by increasing the associated risk.
When trading on the IQ Option platform, you can also use a multiplier for certain asset types, namely Forex, Stocks, commodities, ETFs. Learn how to use this platform feature correctly and what precautionary measures are required by reading the full article.
What is a multiplier?
By using a multiplier, the trader gets the ability to manage a position that is greater than the amount of funds at his disposal. For example, when opening a $100 deal and using an x5 multiplier your potential profit (and loss) will be calculated as if you were investing $500. In other words, the payouts you receive (and the losses you incur) will be five times bigger. This option can turn out to be valuable, especially when the direction of the future price movement can be accurately predicted and vice versa since it can incur higher losses if the direction of the future price movement is not accurately predicted.
Why use it?
A multiplier was originally introduced on the Forex market. The reason for that is simple: currency pairs do not usually demonstrate big price swings, their daily changes are barely enough for traders to speculate on them. Traders turn to a multiplier in order to speculate on small price differences and still receive substantial results. Nowadays, this tool can also be applied to other assets, not only Forex. It is up to you to decide what is more important in each particular case, lower risk (no multiplier) or higher returns (with a multiplier). No matter what you choose, it is always beneficial to have more options at your disposal.
How to apply in trading?
In order to use a multiplier, choose Forex or Stocks from the list of available trading instruments at the top of the screen. Then, before opening the deal, choose the multiplier you want to apply. Its value will depend on the particular asset you choose. It comes without saying that the higher the multiplier, the bigger the position you can control (but also the potential loss).
Risk management
The use of a multiplier is offering different opportunities to traders who know exactly what they are doing. However, it should be applied with caution as not only the upside but also the potential loss will be multiplied respectively. Losing your money at an accelerated rate can disappoint the majority of traders and lead to an even greater loss. Avoid using this tool when uncertain about the deal you are about to open.
