A common mistake beginning forex traders make is to use leverage without taking into account the risk in relation to the amount of money available in their trading account. Leverage can wipe out a trading account very quickly if it is not handled properly.
Although using leverage is important while you trade in forex, it is also important to take care of the risk factors associated with it. Also it is essential to maintain the leverage to be low and make use of trailing stops for reducing the downside and protecting the capital.
Leverage is a double-edged sword, as real leverage has the potential to enlarge your profits or losses by the same magnitude. The greater the amount of leverage on the capital you apply, the higher the risk that you will assume. Note that this risk is not necessarily related to margin-based leverage although it can influence if a trader is not careful.
Roberto21 posted: when using leverage money management really a big factor , but the problem is newcomers dont know how to manage money when trading. as a result they become loser most of the time.
Here's my suggestion/example for a good money management:
Account size 1.000€: lot-size 0.01lot (per trade) 10.000€: 0.10lot 100.000€: 1.00lot 1.000.000€: 10.00lot Maximum account-DD: 10-20% (while trades are running, use an SL if you're not sure when to stop out yourself), maximum used margin per trade: 1% (of your whole account). As a professional trader you have barely more than 2 or 3 trades opened at once in your account. All people who show you more are scammers or gamblers who don't really trade, or are traders with too much greed and who're not interested in long-term steady profits but only fast money (they probably always blow their accounts after some time). This goes for all accounts with a maximum account leverage of up to 1:500. Higher leverages like 1:1000 or 1:2000 I would not recommend. For beginners it's good to start with 1:100.
Btw.: the ESMA has a regulation that you can only trade with a maximum leverage of 1:50 with European brokers. But I guess they'll stop that regulation in 2021 again, because a lot of traders using offshore brokers now (instead of the European ones).
But nevertheless, with lower leverages you could also use higher lot-sizes; it depends on the broker's margin being used per asset (usually you can find it in the details of each asset).
In Fx trading , leverage is useful for trader , especially if trader start with small balance hence with leverage it will giving opportunity to making transaction on Fx market , now some broker offer high leverage until 1:1000 but so far I am only use leverage 1:400 as maximum.
I had a problem with leverage ratio. I used high leverage without real trading plan and became loser. I request, please before live account, trade in a demo account with leverage. Minimum you would see the performance how leverage works.
I think we should not use high leverage in the begining of our trading period and should use low leverage, you can make some good and small profit it and can continue with high leverage when you get some good experience.
Being a newbie, always go for low leverage like 100x or 50x. It will help you in understanding the concept of the leverage that how it works, what role does it play in a trade. Using leverage is a complex decision always make it with the utmost care and analysis.
Leverage is a double-edged sword that can help increase profits, but can also accelerate losses. When you use leverage to trade in the forex market, you need to fully understand the advantage and disadvantage of leverage.
actually so many important financial tool in Forex trading , from all leverage is most important which an investor should consider when choosing a broker , it completely relates with risk management , if you know how to manage risk , i think there is very few chance to bring good amount of losses by using leverage , otherwise really it could be dangerous.
Leverage is a very important tool for trading in forex. It helps a trader to earn more money with their little investment. But without proper knowledge, using high leverage can be very risky. So, think before you using high leverage.
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.