To use chat, please login.
Back to contacts

High leverage = High risk?

Jan 24, 2021 at 09:34
3,134 Views
110 Replies
Member Since Nov 16, 2020   16 posts
Feb 03, 2021 at 10:35
RelySmith posted:
blandpatsyy posted:
Garrywilson posted:
I find it too risky to use leverage. Can’t imagine owing money to the broker and defeat the whole purpose of being in the market.
If you use a broker that offers negative balance protection, there’s no way that you’ll be risking owing anything to the broker. Then there’s stop loss as well to the rescue. If I’m not wrong all brokers offer these features, and if yours don’t, simply transfer your funds to a better broker.
I doubt if Robinhood offers negative balance protection
It doesn’t need to, Robinhood simply doesn’t allow short selling. But sadly there’s no forex option there. So I had to make an account with Fxview. Zeroed in on this one cause of the wider currency options. And ya, they very clearly offer negative protection.
Chelsea Blacks (blackChelsea)
Member Since Jan 22, 2021   125 posts
Feb 03, 2021 at 11:54
I think when newbies enter the live forex market, they want to book more profits with very small amounts, so leverage attracts them. But it should be kept in mind that leverage is associated with a certain amount of risk. While it can push your trades to make profits also at the same time it can put you in loss which is even more than your balance you have. When I started, I used to look for a 1:30 leverage ratio with a minimal balance that I can handle. This keeps my risk minimal. You can gradually increase your leverage ratio depending upon your earnings and understanding.
Member Since Oct 29, 2020   53 posts
Feb 04, 2021 at 07:43
blackChelsea posted:
I think when newbies enter the live forex market, they want to book more profits with very small amounts, so leverage attracts them. But it should be kept in mind that leverage is associated with a certain amount of risk. While it can push your trades to make profits also at the same time it can put you in loss which is even more than your balance you have. When I started, I used to look for a 1:30 leverage ratio with a minimal balance that I can handle. This keeps my risk minimal. You can gradually increase your leverage ratio depending upon your earnings and understanding.
I understand, and so I am not going to rush into any trade. I will start with safe pairs like EURUSD and then try my hands with other pairs.
Member Since Jun 23, 2020   29 posts
Feb 04, 2021 at 08:33
Garrywilson posted:
ddarko3 posted:
unsightlydray posted:
As someone with just a few dollars extra to give trading a shot, would it be possible at all to gain anything without the use of leverage? And is it even wise to use up all of your own cash?
Technically leverage helps you to gain more but the problem with them is that you can also lose completely
I completely agree with you, and sadly it’s the losing part that happens more.
That is because most new traders simply want to start making millions right from the very start. They overtrade, they get greedy, and treat trading more like gambling. They pay the price through increased losses.
Member Since Jul 17, 2020   42 posts
Feb 04, 2021 at 11:24
Johnathankim posted:
Garrywilson posted:
ddarko3 posted:
unsightlydray posted:
As someone with just a few dollars extra to give trading a shot, would it be possible at all to gain anything without the use of leverage? And is it even wise to use up all of your own cash?
Technically leverage helps you to gain more but the problem with them is that you can also lose completely
I completely agree with you, and sadly it’s the losing part that happens more.
That is because most new traders simply want to start making millions right from the very start. They overtrade, they get greedy, and treat trading more like gambling. They pay the price through increased losses.
If proper attention is paid to risk management, then high leverage can be used.
Member Since Jul 03, 2020   36 posts
Feb 05, 2021 at 10:16
Leverage is indeed 2 sides of the same coin. On one side it will give you major exposure and on the other poses a likelihood of draining all of your funds.
Member Since Nov 24, 2020   12 posts
Feb 06, 2021 at 06:13
There is no fixed amount which is right for using leverage. Using leverage seriously depends on your ability to take risk and how much you can afford to lose. PNL calculators are fine way of assessing your risk per trade. You’ll find this calculator with most brokers - XM, FxPro.
Member Since Oct 29, 2020   53 posts
Feb 08, 2021 at 08:04
forextrader777 posted:
High leverage attracts new traders but few of them know the actual working of leverage. I would recommend that before pushing yourself into the trades that need margin, try to understand the concept clearly, otherwise it can wipe off your account balance.
Yes, I am taking my sweet time to be thorough with trading concepts.
Member Since Jul 17, 2020   42 posts
Feb 08, 2021 at 12:35
Steve, even forextime offers it. So does fp markets. These are my ex brokers.
Member Since Jun 23, 2020   29 posts
Feb 09, 2021 at 08:27
stevewood posted:
There is no fixed amount which is right for using leverage. Using leverage seriously depends on your ability to take risk and how much you can afford to lose. PNL calculators are fine way of assessing your risk per trade. You’ll find this calculator with most brokers - XM, FxPro.
I’m a stickler when it comes to using pnl. Never have, never will trade without properly scrutinising the potential losses and profits in every trade, no matter worth a lot of money or small.
Member Since Nov 16, 2020   16 posts
Feb 10, 2021 at 10:54
RelySmith posted:
josejames posted:
RelySmith posted:
blandpatsyy posted:
Garrywilson posted:
I find it too risky to use leverage. Can’t imagine owing money to the broker and defeat the whole purpose of being in the market.
If you use a broker that offers negative balance protection, there’s no way that you’ll be risking owing anything to the broker. Then there’s stop loss as well to the rescue. If I’m not wrong all brokers offer these features, and if yours don’t, simply transfer your funds to a better broker.
I doubt if Robinhood offers negative balance protection
It doesn’t need to, Robinhood simply doesn’t allow short selling. But sadly there’s no forex option there. So I had to make an account with Fxview. Zeroed in on this one cause of the wider currency options. And ya, they very clearly offer negative protection.
Fxview?? Never heard! Another offshore I bet
Well, fxview’s been around for awhile now. Dug into their company’s history and credentials a lot before opening ECN with them. They are giving up to 500x. Spreads I found attractive, on the lower side. And I don’t think there’s anything wrong with offshore brokers as long as they are regulated. A fixed and a rigid mindset can be very limiting to a trader.
Member Since Jul 17, 2020   42 posts
Feb 11, 2021 at 08:30
RelySmith posted:
What is the best way of knowing if a trade is too risky?
How long have you been trading for? I always follow the trend. And follow the ATR method of stop loss.
Member Since Oct 15, 2020   37 posts
Feb 11, 2021 at 11:03
Isn’t trailing stop loss a better use of sl? Also of late I have been relying a lot on the economic calendar. Really helpful in knowing if a particular time is good to trade.
Member Since Nov 24, 2020   12 posts
Feb 12, 2021 at 06:22
Garrywilson posted:
Isn’t trailing stop loss a better use of sl? Also of late I have been relying a lot on the economic calendar. Really helpful in knowing if a particular time is good to trade.
A fan of fixed stops!
Member Since Nov 07, 2020   34 posts
Feb 15, 2021 at 09:18
Yes, me too Steve. I am not a fan of constantly monitoring my trades so fixed stops work like wonder for me.
Member Since Sep 18, 2018   11 posts
Feb 15, 2021 at 10:34
Everyone should use fixed stops, even if it is a safety stop loss wider than normal. All it takes is some political event to shake the markets just after you entered to cause massive price spike. Without a safety SL you could make massive losses
Member Since Feb 16, 2021   29 posts
Feb 16, 2021 at 07:57
It seems to me that the risk does not depend on the size of the leverage, on our ability and willingness to take risks.
Member Since Nov 24, 2020   28 posts
Feb 16, 2021 at 10:04
@Eric ideally, you shouldn’t risk more than 1 or 2% of your trade. It also depends upon the trading style of a person and how much they’re willing to risk. For example, I trade with IB and Fxview and my risk management is such that I don’t go beyond risking 2% of it. This helps me maintain a balance and minimises potential losses too.
Member Since Nov 07, 2020   34 posts
Feb 17, 2021 at 09:31
salamibrish posted:
@Eric ideally, you shouldn’t risk more than 1 or 2% of your trade. It also depends upon the trading style of a person and how much they’re willing to risk. For example, I trade with IB and Fxview and my risk management is such that I don’t go beyond risking 2% of it. This helps me maintain a balance and minimises potential losses too.
I agree with this. Not risking much can be an advantage.
Member Since Nov 16, 2020   16 posts
Feb 17, 2021 at 12:19
Garey! It's okay to not take unnecessary risks but still I would say take calculated risks. This would be much beneficial for you.
Sign In / Sign Up to comment
You must be connected to Myfxbook in order to leave a comment
*Commercial use and spam will not be tolerated, and may result in account termination.
Tip: Posting an image/youtube url will automatically embed it in your post!
Tip: Type the @ sign to auto complete a username participating in this discussion.