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Author Topic: Question about lot size and leverage  (Read 6572 times)

Offline navigator

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Question about lot size and leverage
« on: May 19, 2009, 11:52:07 AM »
Hello,

Maybe it is a newbie question, but if I buy 0.1 lot with leverage 1:100, is it the same if I buy 0.05 lot with leverage 1:200?

Thank you for the answer!

Offline donnaforex

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Re: Question about lot size and leverage
« Reply #1 on: May 19, 2009, 12:32:25 PM »
no. 0.1 lots is always the same no matter if your leverage is 1:1 or 500:1 or even 1000:1.

What changes is the amount of money you need in your account to cover that trade. At 1:1 leverage you would need to cover the full trade size, for 0.1 lots that is 10,000 units of currency, therefore you need more in your account than trading at 100:1, where you need only 100 units of currency to cover the same trade (the broker "loans" you the rest- that is what leverage is about).
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Offline Peter W

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Re: Question about lot size and leverage
« Reply #2 on: May 20, 2009, 03:46:50 PM »
Hi,
What leverage should we use? I think 1:100 should be fine (for accounts with 1000€), when using more, the change to get cicked out of the trade is higher with a 1:500 leverage, right?

Thanks.

Regards,
Peter

Offline donnaforex

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Re: Question about lot size and leverage
« Reply #3 on: May 20, 2009, 09:43:43 PM »
No, the higher the leverage the less likely you will get margined out of a trade, because you need less money to maintain that trade with. That is as long as you are using "appropriate" risk (ie. under 50% of your account!). At low leverage, you eat up more margin, so a move against you in the market can make you run out of margin.
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Offline roywoods

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Re: Question about lot size and leverage
« Reply #4 on: June 10, 2009, 01:58:26 PM »
Hi Donna,

So what's BAD about high leverage?  I've just opened a micro account 2 days ago with £500 deposit and am running FAPTurbo with EURCHF and USDCAD both on your recommended settings.  I reduced my leverage from the default 500:1 to 100:1 thinking that I was "playing safe".

I received an Alpari Daily Confirmation report at 23:59 last night while I had two trades open USDCAD (.12 lots) UERCHF (0.28) lots.  At the time of the report the USDCAD trade stood at +£2.13 and the EURCHF trade stood at -£4.94.  A total  position of -£2.81.  The Daily Confirmation stated that the Margin Requirement is £315.15, my total equity was £514.40, and therefore my available margin was £199.25.

If the market moved significantly I would be margin called.  Would I be less likely to be margin called if I increased my leverage to 500:1?  I guess my Margin Requirement would be reduced to a fifth (ie. £63) leaving me with £451 free margin.  Is this correct?

Is the only risk with higher leveraging the fact that I can open larger positions (or more of them) and therefore leave myself open to bigger losses per pip?   

Will FAPTurbo trade bigger lots if I have higher leveraging?

Can I ask what leveraging your account is set to?

Many thanks Donna for a brilliant website and all your efforts towards making us all successful.

Roy

 

Offline donnaforex

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Re: Question about lot size and leverage
« Reply #5 on: June 10, 2009, 09:31:02 PM »
Roy, you are understanding it correct yes... bigger leverage means you can go longer without getting margined out since less money is required to maintain that trade. The only risk is that someone will not know what they are doing and open a huge lot size that is way too big for their account- as you correctly mentioned also.

FAPTurbo trades exactly the same no matter what your leverage is.

My leverage is 500:1
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Offline roywoods

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Re: Question about lot size and leverage
« Reply #6 on: June 26, 2009, 10:20:33 AM »
Oh... just saw your reply!!!  Thanks.  I'll put my leverage back to 500:1.

Offline roywoods

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Re: Question about lot size and leverage
« Reply #7 on: July 01, 2009, 06:19:22 PM »
Another newbie question...

Is there a significant difference in opening a GBP account as opposed to a USD account in pip value terms?

eg. Say I open a $500 USD account and make a 0.01 lot trade which closes at a profit of $2.60 (hurray) would the same trade in a £500 GBP account result in a £2.60 profit or will the profit be converted from $2.60 to GBP resulting in ,I don't know, £1.57 profit?

I'm just wondering is it better to invest my £500 in a $825 account?  Will it give me more room for error?

Thanks

Offline BabyTrader82

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Re: Question about lot size and leverage
« Reply #8 on: July 04, 2009, 05:16:28 AM »
Hi Roy,

I have the same question in my mind. Hope someone can enlighten us :)

xoxo
BabyTrader82

Offline ferran586

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Re: Question about lot size and leverage
« Reply #9 on: July 06, 2009, 11:57:58 PM »
Roy and BabyTrader,

Personally I would recommend holding the account in your native currency unless you do not want to speculate how the two currencies will act.  For example, if you think that the USD will be strong against the GBP over a certain period of time then it might be worth it do open the account in USD. But if the USD weakens compared to the GBP you may end up "losing" money when you convert it back to your currency.  So again, if you do not want to speculate, I would recommend to have it in the currency you use everyday.  Hope this helps.  :)

Eric

Offline hybrid

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Re: Question about lot size and leverage
« Reply #10 on: March 14, 2016, 01:37:57 PM »
Leverage and lot are two different things used in trading . Leverage gives you benefit with small account you can trade a big trading if you had good quality to manage it . Lot size you choose determines how much risk you are taking per pip.

Offline drunkfx

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Re: Question about lot size and leverage
« Reply #11 on: March 18, 2016, 01:44:50 PM »
Quote from: ferran586 link=msg=8346 date=1246921078

Roy and BabyTrader,

Personally I would recommend holding the account in your native currency unless you do not want to speculate how the two currencies will act.  For example, if you think that the USD will be strong against the GBP over a certain period of time then it might be worth it do open the account in USD. But if the USD weakens compared to the GBP you may end up "losing" money when you convert it back to your currency.  So again, if you do not want to speculate, I would recommend to have it in the currency you use everyday.  Hope this helps.  :)

Eric


No difference which currency you use in your trading account. But check conversion fees first, from big amounts like 10 or 20 k you can easily lose 20-40$ just from conversion when withdrawing, transferring or uploading funds.
I prefer to hold my deposit in USD with Hotforex and even didn't explore other options

 

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