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  • 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

  • #2
    Re: Help with leverage

    Originally posted by sheetal
    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.

    Comment


    • #3
      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.

      Comment


      • #4
        Why not use this calculator: http://www.goforex.net/money-management-calculator.htm

        Comment


        • #5
          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.

          Comment


          • #6
            start it with microlot

            Comment


            • machete
              machete commented
              Editing a comment
              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.

          • #7
            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.

            Comment


            • #8
              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.

              Comment


              • #9
                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.

                Comment


                • #10
                  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.

                  Comment

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