'Or if you don't make money, i.e. make unprofitable decisions, then you lose it faster. '
Ah, no, not exactly. Forget the leverage for a moment. Lets say that you have $1000 in your account and open 1 trade for 1 lot and the currency price temporarily heads the wrong direction. You have $1000 to protect that trade from being closed because the draw-down would have eaten up all of your money. But your broker is afraid that if you run out of money, you may not have all of your trades closed in time and will still owe him money. So he sneaks in behind you and closes your open trades and you lose all of the draw down.
This was not you closing the trade, the broker did and told you that he always closes the trade when the available funds in the account is getting low. You ask, how low. He tells you that they (brokers) are not unreasonable, they will let you decide at what point the broker will close your trade before you actually run out of money.
So the question is, How much before you actually run out of money do you want the broker to close all of your trades for you.
You say, for a one lot size trade you want the broker to close your trade for you when you get below $500. One standard lot is 100,000 units of the first currency listed in the currency pair. 100,000 / 500 = 200. That 200 is a ratio of how much you will have left after the broker close your account, to the size of the trade. This ratio of 200 to one is the leverage. You have a marginal leverage of 200:1 in America or 1:200 in the rest of the world.
Now if you have a 500:1 ratio (marginal leverage) $100,000 / 500 = $200 So if you have a higher leverage, it will allow the trade to stay open until your balance goes below $200 instead of below $500. Of course you can close the trade at any time, you just have to decide at what point you want the broker to do it for you.
If your trade wins, your profit is the same regardless of when you tell the broker to close the trades for you. The same size but not the same percentage. Why? Because you have had to add more to your account size to protect the broker. This is not trading money but it counts when you want to know what percentage of profit do you make.
The marginal leverage only determines how much you will have left in the account after the broker closes all of your trades for you in a margin call and has nothing to do with the trade, not how much you make nor how much you lose. The reserve leverage is a ratio of how much of your account you can not use to trade (or to protect open trades) to the size of the trade in lots.
A quick qualification of that last statement. A one lot standard trade will have a $10 change in profit for each 1 pip change in price. At 200:1 $500 is left in the account that we can't trade with and since we started with $1000 in the account, we only have $500 left to trade with. With a one lot trade size, a 50 pip movement in the wrong direction will be closed with a margin call. But if we had a 500:1 ratio, we would only have $200 in reserve and $800 to protect the trade to 80 pips. If the price went 65 pips in the wrong direction (spike) before it turned around and went the right direction, with the lower leverage, you would have a margin call and lost $500, with the higher leverage, you would have made a profit. In this respect, a higher leverage could make more money, but in all other cases, it is irrelevant.
Hopes this helps.
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