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Author Topic: question about leverage  (Read 6709 times)

Offline dennisau

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question about leverage
« on: April 13, 2011, 06:06:48 PM »
Hi, everyone, I have something to ask, please help.
It is very often to see warning about over leverage is so dangerous. I am confuse about that.
leverage increase the capability of purchasing, higher leverage mean I can buy more.
in forex, which mean I can open a bigger position.
so, if I follow a fine money management, let's say risk no more than 2% per trade, under this condition, no matter how high my leverage is, it doesn't matter. right?

thank you

Offline Gumrai

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Re: question about leverage
« Reply #1 on: April 13, 2011, 10:22:33 PM »
I agree with you.
High leverage can be a problem for some people who lack discipline. Especially those who are inclined to chase losses and over-extend themselves.
There are also far too many who simply do not understand the risk involved when they place a trade. They look at the pips profit, but don't know eactly how much they are risking should their stop be hit.

Offline ajay555

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Re: question about leverage
« Reply #2 on: August 04, 2012, 12:01:43 PM »

I too agree with you,
I am also having same doubt.
If a trader with less capital must need high leverage to increase his profit.
High leverage will not direct you to lose.Wrong strategies and money management may directs you to loss. :D

Offline forexfish

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Re: question about leverage
« Reply #3 on: August 04, 2012, 12:06:51 PM »
I agree with you.
High leverage can be a problem for some people who lack discipline. Especially those who are inclined to chase losses and over-extend themselves.
There are also far too many who simply do not understand the risk involved when they place a trade. They look at the pips profit, but don't know eactly how much they are risking should their stop be hit.

For descipline traders, higher leverage is not making a big deal as they trade within limit.

No difference if say broker has stop out 20% of 1:100 leverage and 40% for 1:200 leverage.

Most offshore brokers give incentives to traders to offer higher leverage and traders get caught, increase their trade size and get caught and end up too quick.




 


Offline JoshTaylor

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Re: question about leverage
« Reply #4 on: October 17, 2012, 01:55:26 AM »
Higher leverage is meant to allow you to risk more on your account. In the US it is not 50:1 which in my opinion is PLENTY of leverage. If you are in so many trades at once with too much risk per trade that 50:1 leverage is not enough, you need to seriously take a look at your equity management plan. 2% risk per trade is MORE than enough per trade and if you are going to risk that much I would be careful and stick to no more than 3 live trades at once.

Happy Trading

Josh Taylor

Offline robl45

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Re: question about leverage
« Reply #5 on: October 20, 2012, 06:41:40 AM »
Higher leverage is meant to allow you to risk more on your account. In the US it is not 50:1 which in my opinion is PLENTY of leverage. If you are in so many trades at once with too much risk per trade that 50:1 leverage is not enough, you need to seriously take a look at your equity management plan. 2% risk per trade is MORE than enough per trade and if you are going to risk that much I would be careful and stick to no more than 3 live trades at once.

Happy Trading

Josh Taylor

The only thing 50-1 leverage does is make you stop out much quicker so the broker can have your profits. I suppose you think spreads that are 2 or 3 times higher than outside the US are for your protection as well?

Offline 999cjb

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Re: question about leverage
« Reply #6 on: October 20, 2012, 08:58:32 AM »
It really depends on the type of software strategy you are running.

Have a look at this example:-

http://www.myfxbook.com/members/LarsoFx/cat-v2-tradefort/351680

This shows an account which at the moment has 147 open trades. Imagine what a low leverage would do to the equity here!

But as the account has high leverage, the equity now is over 99% and the overall risk is minimal.

If you are a US resident limited to a very low equity, running this type of strategy means using much more of your capital. Good for your broker and those over-stretched banks (  :( ) but bad for you.

Offline Candlestick

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Re: question about leverage
« Reply #7 on: October 20, 2012, 11:17:46 AM »
Leverage should be chosen according to your trading style and investment size. I personally use 1:100 but with larger account i would use 1:50 and still have no trouble getting the same return from my trading.  Personally i dont like leveraging over 1:100, but i agree that for some high risk small accounts up to 1:500 is a great offer which can make you incredible return on investment.

Offline jefftimothy

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Re: question about leverage
« Reply #8 on: October 22, 2012, 12:42:22 AM »
Hi, everyone, I have something to ask, please help.
It is very often to see warning about over leverage is so dangerous. I am confuse about that.
leverage increase the capability of purchasing, higher leverage mean I can buy more.
in forex, which mean I can open a bigger position.
so, if I follow a fine money management, let's say risk no more than 2% per trade, under this condition, no matter how high my leverage is, it doesn't matter. right?

thank you

Leverage increases the ability to but more asset than your capital. When we choose leverage during sign up what we choose is the maximum leverage for us. That means if we choose 1:500 leverage, we can use maximum 1:500 leverage in margin trading .That is leverage<=500. So if we buy .1 lot with a trading account of $100, here we use 1:100 leverage which is less than 1:500 and we can use it as it is less.
So if we maintain proper money management it's no problem what   high leverage we are using.

Offline Bigsteve

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Re: question about leverage
« Reply #9 on: October 22, 2012, 01:16:01 AM »
Low leverage protects your available account balance because of the higher margin requirement. If I only needed 10 cents to hold a 100K trade and that trade goes against me and is losing, then all of the account less the 10 cents becomes available for loss. If the price touches the margin requirement minimum then the broker will automatically close the open trade as the account would have run out of available funds to hold the trade. Don't trade large lots, only small bites. Here is the calculation if your broker has 5 digit pricing.
Account balance is 1,000.00
1,000.00 X .00002 = lot size .02
You should trade no more than .02 lots per thousand dollars of your account balance  (just an idea it's really up to you) how much risk to take on

Offline tradingteacher

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Re: question about leverage
« Reply #10 on: December 20, 2012, 02:11:46 AM »
It's the old double edged sword lol.

IF you have EXCELLENT disipline what you're say is right - but over lev is busting people's accounts everyday.

Leverage can be very risky if you don't manage it right.

Let's put it this way ... Lehmen brothers over leveraged ... (extreme example)

Offline FxStarflight

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Re: question about leverage
« Reply #11 on: January 09, 2013, 09:36:32 AM »
Yes you are right.

So let's say your account has $10000, a 2% risk is $200. That means if your trade loses, you will lose $200. That's it. Your leverage level is irrelevant.

A higher leverage means your margin requirement per trade will be lower, so you may open more trade positions, that's all.

So if a person says that high leverage is risky, he does not know what he is talking about. Because in the end it is about managing your risk amount.

 :)


Hi, everyone, I have something to ask, please help.
It is very often to see warning about over leverage is so dangerous. I am confuse about that.
leverage increase the capability of purchasing, higher leverage mean I can buy more.
in forex, which mean I can open a bigger position.
so, if I follow a fine money management, let's say risk no more than 2% per trade, under this condition, no matter how high my leverage is, it doesn't matter. right?

thank you
Enjoy FREE access to professional education and trader tools when you trade with FXPRIMUS:
http://fxprim.us/chkpdg

Offline Wajeeh93

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Re: question about leverage
« Reply #12 on: August 10, 2013, 06:50:17 PM »
Yes it is absolutely right that if you have a higher leverage than you would be able to open higher positions with relatively lower capital in your forex account which surely means that you would be able to open bigger positions that can bring higher profits too. But you are failing to realize that higher leverage also means that if the market moves against you, you will have to bear higher losses too and they can get fatal to the limit of margin call. That is why its always better to keep moderate leverage in forex trading.
Currently making $100 - $500 a day with <a href="https://spud.iljmp.com/1/wajeeh"> THIS SYSTEM </a>

Offline equityfx

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Re: question about leverage
« Reply #13 on: April 11, 2015, 07:59:59 PM »
Quote from: Wajeeh93 link=msg=280574 date=1376157017

Yes it is absolutely right that if you have a higher leverage than you would be able to open higher positions with relatively lower capital in your forex account which surely means that you would be able to open bigger positions that can bring higher profits too. But you are failing to realize that higher leverage also means that if the market moves against you, you will have to bear higher losses too and they can get fatal to the limit of margin call. That is why its always better to keep moderate leverage in forex trading.


You are right cause higher leverage can bring more margin to make transaction and its the advantage for small trader who use small capital , its hard for small capital for survive when there are not leverage anymore and i am balieve that so many people can join here cause of leverage to help them to trade in forex market

Offline Huang jing

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Re: question about leverage
« Reply #14 on: May 18, 2015, 08:39:09 AM »
The leverage should be selected according to personal trading style and deposit size. As for myself, I'd like to choose 1:100 for normal trading, some times for larger deposit, I will reduce to 1:50. When the leverage more than 1:00, I just feel that the trade beyond my control. Anyways, the leverage should be based on individual.
« Last Edit: May 18, 2015, 10:37:33 AM by Huang jing »

 

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