Questions Regarding Leverages

[checkmail]

Hello friends this is checkmail and me would like to trade max quantity with minimum amount.

 

Am using 1:100 leverage and mine 0.01 lot = 1.32 cents on eur/usd form avail margin.

 

If i use 1:500 leverage than mine 0.01 lot = how much $ on eur/usd from avail margin ?

 

Also does our equity amount shrinks or rises with increase in leverages form 1:100 to 1:500 ?

 

can anyone answer this ?:D

[shabz]

Read this article about the dangers of Leverage:

 

http://www.investopedia.com/articles/forex/07/forex_leverage.asp#axzz1ljSfqkxO

[Roels Major]

http://i600.photobucket.com/albums/tt90/RoelsMajor/Margin.jpg

[Kristianto]

leverage is extremely dangerous. anything above 100X is almost like playing in the casino

[shabz]

Not understanding Leverage is the main reason why most people blow their accounts.

 

Example for EURUSD.

 

A leverage of 1:1 for a $1000 account would mean you control only the pip gain/loss of $1000 which is 1000/100,000 = 0.01 Lots, a 1 pip gain or loss = 10 cents, it would take a move against you of 10,000 pips to blow your account, as it would take a 10,000 pip gain to double your account.

 

By giving you 1:100 leverage, a fully leverage position would mean you could control $1000 x 100 = 100,000/100,000 = 1.0 lots, a 1 pip gain or loss = $10, in this example it would take only a move of 100 pips against you to blow your account, but brokers to protect themselves will have taken out of your account a margin for the position, so very often they will give you a margin call, once available margin gets used up by your losses. Which would also mean your position closes at a loss automatically even if your stoploss was not hit.

 

Leverage is designed for people with small accounts to take larger positions than their account could normally trade, it is a dangerous 2 way sword, can give you great returns, but losses can also be devastating.

 

Risk management is key to survival in this game, look at position calculators such as :

http://www.earnforex.com/position-size-calculator

 

This should help you to have the correct lotsize, to your account size, stoploss placement, & currency pair.

[hagarb]

Is leverage advised for beginners? If most of traders loose money, this tool seems to be a short way to prejudice. What leverage percentage do you use? Thanks!

[shabz]

Most traders would be advised not to use leverage more than 1:2 or 1:3, which would equate to about 2 - 3 % of your account size. This way you could control your drawdown when it happens and not be left with a big hole in your account.

With leverage of just 1: 20, 20% of your account could be lost and to get back the loss you would have to make 25% win to get back to Breakeven, and this increases as your leverage goes higher.

 

Leverage can be a quick way to make money as well as fast way to drain your account. Why do you think Brokers offer 1:500 ?

[Forturama]

I think you should adapt your leverage to your trading system.

Scalper will use a higher leverage than position traders... using a not adapted leverage can cause a huge loss.

 

Most traders would be advised not to use leverage more than 1:2 or 1:3, which would equate to about 2 - 3 % of your account size. This way you could control your drawdown when it happens and not be left with a big hole in your account.

With leverage of just 1: 20, 20% of your account could be lost and to get back the loss you would have to make 25% win to get back to Breakeven, and this increases as your leverage goes higher.

 

Leverage can be a quick way to make money as well as fast way to drain your account. Why do you think Brokers offer 1:500 ?

[Gad]

leverage that we use should be adjusted to the capital that we use. so do not arbitrarily choose the origin of leverage because other traders

[fxapex]

I think one should use leverage only if he/she is experienced enough, you should be smart enough to use leverages.

[alventa]

I think one should use leverage only if he/she is experienced enough, you should be smart enough to use leverages.

 

Yes, it is. The leverage is like knife, you can use it with smart. Money management is also needed. :-bd

[binaryowner]

Use leverage wisely, compensate it with trading lots, if you are unsure about risk you position can lead to.I use 1:400 leverage and 0.1 lot in most of my trades with Hotforex. I just set it at the start in my money management strategy and still stick to it,

[usok]

I first started with a 1:500 i guess its a the pre set leverage for hotforex micro accounts, then when they offered the 1:1000 leverage i went lower lol i was trading a 1:300 its more like my zone

[vic84]

Use leverage wisely, compensate it with trading lots, if you are unsure about risk you position can lead to.I use 1:400 leverage and 0.1 lot in most of my trades with Hotforex. I just set it at the start in my money management strategy and still stick to it,

 

Due to this high leverages, many traders take high risk, but they should understand that for utilising such high leverage a trader should be very competent in trading.

[gacha]

I used to 1:500 leverage on armada markets but not for over 1000 usd intitial deposit, when go higher said 5000 usd, i used 1:200. i open and account for amount 1000 usd with armada, and use 1:500, got bonus deposit also which means an extra margin level for my trading account. low leverage is more like a stealth stop loss level for your order, low leverage restrict your active trade (by lost size), as the lower it is the higher margin requirement for each trade.Money Management is key in this so you need to define your risk & calculate the correct position size for your stop-loss.

[binaryowner]

I used to 1:500 leverage on armada markets but not for over 1000 usd intitial deposit, when go higher said 5000 usd, i used 1:200. i open and account for amount 1000 usd with armada, and use 1:500, got bonus deposit also which means an extra margin level for my trading account. low leverage is more like a stealth stop loss level for your order, low leverage restrict your active trade (by lost size), as the lower it is the higher margin requirement for each trade.Money Management is key in this so you need to define your risk & calculate the correct position size for your stop-loss.

 

 

Yeah deliberate and wise approach is the key device for profitable trading. I don't think I want to lower my leverage with Hotforex, I just change lot size if I want to lower risk and that's it. If you get less leverage your position size is also reduced and you need to wait longer to caught same number of pips, while I am hunting for <20 pips profit..

[orni308]

In order to use leverages you should be an experienced trader, leverages are very luring but if you end up making a negative trade then you have repay a lot .

[gacha]

traders can find many information about definition of forex market, including margin and leverage explanation. while you may need more informative way of learning, a video explanation would be more interesting

https://www.youtube.com/watch?v=xbs7Khix9rM

contain basic fx knowledge including how to calculate profit/loss, how leverage affect our trading account.

you may want to check their forex infographic

http://www.armadamarkets.com/infographics/

it's more informative and a better way to learn fx market basic knowlegde.