Help with leverage

Hello,

 

I am newbie and just starting off. What I'm bit confused about is about leverage.

 

My micro a/c is worth US$ 250. On any given trade, I'd be risking 4% of my a/c (= $10).

 

How can I implement or take advantage of 1:5 or 1:10 or 1:100 leverage without affecting the overall risk of 4% on any given trade?

 

Thank you

Re: Help with leverage

 

Hello,

 

I am newbie and just starting off. What I'm bit confused about is about leverage.

 

My micro a/c is worth US$ 250. On any given trade, I'd be risking 4% of my a/c (= $10).

 

How can I implement or take advantage of 1:5 or 1:10 or 1:100 leverage without affecting the overall risk of 4% on any given trade?

 

Thank you

 

let's say you had a 10 pip STop loss, so you are trading a $1/pip.

$1/pip is a $10,000 trade on USD pairs

 

if you leveraged at 40:1 you could trade $10,000 with $250.

 

but you don't want 100% of your balance tied up in a trade and your broker won't let you..

so go with 100:1 leverage and just keep using your risk % based upon SL and account balance.

:-bd

Re: Help with leverage

 

Quoted from the Baby Pips:

 

Leverage Defined

 

The textbook definition of “leverage” is having the ability to control a large amount of money using none or very little of your own money and borrowing the rest.

 

For example, in forex, you can control $100,000 with a $1,000 deposit. Your leverage, which is expressed in ratios, is now 100:1. You’re now controlling $100,000 with $1,000.

 

Let’s say the $100,000 investment rises in value to $101,000 or $1,000. If you had to come up with the entire $100,000 capital yourself, your return would be a puny 1% ($1,000 gain / $100,000 initial investment). This is also called 1:1 leverage. Of course, I think 1:1 leverage is a misnomer because if you have to come up with the entire amount you’re trying to control, where is the leverage in that?

 

Fortunately, you’re not leveraged 1:1, you’re leveraged 100:1. You only had to come up with $1,000 of your money, so your return is a groovy 100% ($1,000 gain / $1,000 initial investment).

 

Now I want you to do a quick exercise. Calculate what your return would be if you lost $1,000.

 

If you calculated it the same way I did, which is also called the correct way, you would have ended up with a -1% return using 1:1 leverage and a WTF! -100% return using 100:1 leverage.

 

You’ve probably heard the good ol’ clichés like “Leverage is a double-edge sword.” or “Leverage is a two-way street.” Well….as you can see, these clichés weren’t lying.

Why not use this calculator: http://www.goforex.net/money-management-calculator.htm

The answer for your question about leverage can be found using some tools available on SpediaFX (my prefered ECN broker).

 

Google it and then go to TOOLS section.

 

I hope this may help you.

start it with microlot

Leverage is the use of borrowed money to invest in a currency, stock, or security. The concept of leverage is very common in forex trading. By borrowing money from a broker, investors can trade larger positions in a currency.

Leverage is a trading mechanism investors can use to increase their exposure to the market by allowing them to pay less than the full amount of the investment. Consequently using leverage in a stock transaction, allows a trader to take on a greater position in a stock without having to pay the full purchase price.

start it with microlot

Indeed, I spent about 3 months trading 0.01-0.05 lot before I started to increase it because you have to get used to small loss first before you can handle larger losses without much discomfort.

Indeed, I spent about 3 months trading 0.01-0.05 lot before I started to increase it because you have to get used to small loss first before you can handle larger losses without much discomfort.

Using leverage could be a profit or loss for some traders because leverage has its advantage.

 

The trader who uses the leverage with a proper strategy can double their profits.

The concept of leverage is quite common in forex trading. By borrowing money from a broker, investors would be able to trade larger positions in a currency. As a result, leverage would be magnifying the returns from favorable movements in a rate of currency's exchange.

 

I'm a beginner trader and would like to know if I should trade using leverage and which leverage is best suitable.

I'm a beginner trader and would like to know if I should trade using leverage and which leverage is best suitable.

 

The best leverage in my view is 1:100, not too low and not too high. However you can always choose risk per trade using appropriate lot size so that loss per trade will be equal pip value multiplied by the number of pips