Retail traders with small-budget trading can take advantage of high leverage, but reckless using position size when choosing high leverage can be disastrous for account trading and maybe lead to quick margin calls, and trading is not gambling.
High leverage is attractive for many traders as it promises high returns. But this is the first half of the equation as high leverage means high loss too. Therefore, choosing the right leverage is the key. Also, while choosing high leverage, proper risk management is essential as risk management reduces the risks involved.
FXOday posted: Retail traders with small-budget trading can take advantage of high leverage, but reckless using position size when choosing high leverage can be disastrous for account trading and maybe lead to quick margin calls, and trading is not gambling.
Exactly. Not the leverage but the position sizes are the dangerous key.
I’d say that leverage is quite an attractive as well as a scary asset. With leverage you can make huge profits with only a small contribution from your side. But if you are not a good trader, this can go against you in the worst way. If you lose a trade using leverage, the full leverage amount along with trading charges will be deducted from your account. That is why you must be an experienced trader, of at least 2-3 years before you start using leverage.
No wonder high leverage is appealing to many traders as it offers high returns. But one needs to keep in mind that high leverage also means high loss. So it is very important that while choosing high leverage, proper risk management should be taken into consideration.
The higher the leverage, the more is your total trading capital, which can mean significantly higher profits. However, remember that leverage can also hurt you. If you are a beginner trader, who is still figuring out fx, and cannot make consistent profits, it is better to try out leverage with smaller ratios. Because if you do not know how to manage risk properly, and how to handle your trade if the market runs against your prediction, you can suffer a huge loss with leverage. You might possibly blow your account as well. That is why it is important to have proper knowledge and experience first. Begin with smaller amounts, and gradually build up your trading skills so that you can make profits using larger leverage.
There are many new traders who like to use high leverage in trading because of high returns. But they forget that they are putting themselves in a high-risk scenario as high leverage isn’t suitable for newbie.Beginners can use low leverages like 1:10 or 1:20.
HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors.
Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance.
You could lose some or all of your initial investment. Do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions.
Any data and information is provided 'as is' solely for informational purposes, and is not intended for trading purposes or advice.
Past performance is not indicative of future results.