UweMoench posted: Many options in using leverage, and in theory and risk, using smaller is better, as I use leverage to keep the 1:100, do not let too many open positions
I agree with you, having too many open positions while using leverage can be disastrous. It is pivotal to choose the right lot size and risk management when using high leverage, otherwise, go for small.
Leverage is indeed an important tool for a forex trader. By using leverage, traders can have the opportunity to earn bigger profits than they can manage to earn with the capital they possess. Low leverage is good for beginners but as they get confident, they can go for a higher leverage to earn more profits.
The forex market uses leverage to allow you to control higher positions than the amount of money in your account. Leverage is often expressed in terms of a ratio. If the leverage is 100:1, you can manage a position worth $100 with just $1. The amount of profit as well as the amount of loss that can be made in the forex market is determined by this. Essentially, it functions as a double-edged sword.
When you trade using leverage, you will need to consider the possibility of losing more than your initial deposit. In fact, you can lose as much as your account balance multiplied by the leverage value. A trader should always use proper money management in order to ensure safe trading.
As a trader we should take the leverage very seriously. Over leveraged can put you into substantial risk and if under leveraged then you may miss the opportunity. I use leverage when advantage is crystal clear. it is important to track the positions and apply stop loss with each trade so that your capital remains in the protected zone.
I have recently talked to my friend. He’s a professional Forex trader and we discussed leverage. I thought that the higher your leverage the faster your depo will grow. As for risks, I certainly thought about them but at that time my mind was overclouded with higher gains. So, my friend told that he earned more with smaller leverage or even without it. I remember that it puzzled me. I asked him to explain this and he told that theoretically with higher leverage a trader can increase his depo much faster but it’s all very unreliable. The matter is that with higher leverage, it’s getting harder to control emotions and even a single mistake may cost too much. There’s one cunning thing about high leverage. You need less margin with higher leverage and it encourages you to trade more aggressively and take a lot of risks throughout the day. You might think that you can start with a relatively small trading deposit and achieve fantastic results. Theoretically, it’s all possible but it’s very hard to make it comes, mostly impossible. My friend told me that market makers have a dozen of cunning traps at hand and it’s a problem to survive their traps with higher leverage. You may even understand the very nature of deceptive market moves but higher leverage can make your already open trades extremely vulnerable. On the contrary, with smaller leverage, it’s much easier to survive any pullback and then get back in the green and it’s especially true for 1:1 or 1:5 leverage. They are safe. I tested various leverage sizes on a demo account and saw with my own eyes that my bro was right.
Leverage is a double-edged sword. If used smartly, it can magnify your profits, but if your strategy fails, then it can magnify your losses as well. But, leverage has a great advantage for traders, it allows them to open larger positions with small capital. To use leverage to your advantage, you must have a strong trading strategy along with a loss management plan.
good question indeed. i have one for you please. what leverage better used with f.ex. $1000 deposit.
Well, I am a retail Forex trader, so for me trading leverage is an essential feature to me! But to be frank, I don’t rely on trading leverage! I am using only 100:1 trading leverage; although I have more options as like others trader!
By borrowing money from a broker, investors can trade larger positions in a currency. As a result, leverage magnifies the returns from favorable movements in a currency's exchange rate. However, leverage is a double-edged sword, meaning it can also magnify losses. It's important that forex traders learn how to manage leverage and employ risk management strategies to mitigate forex losses. Remember that if you will trade with leverages improperly it might easily lead you to losses, because leverage is quite a risky idea. You have to be convinced in your powers in order to trade with leverages.
Choosing leverage will different perspective each trader, but need to understand if choosing high leverage also can be associated with risk trading, it could increase the risk when choosing high leverage, because can lead to overtrading when trader being greedy, safe leverage for beginners is low leverage, but many intermediate traders they like to use leverage 1:100, like as many PAMM managers choose this leverage.
As the effect of leverage on both gains and losses can be exaggerated, it should be employed only within its logical boundaries. A trader should only utilize leverage when she/he has a clear advantage on her/his side. When employing leverage, it's crucial to keep track of the market's trading volume.
If you are aware of what and how to tackle the leverage with a proper strategy, then it can prove to be very useful to your trading. Else, you will be expecting a wipe out from your account. So be careful of using them if you want to make sure to keep up with the market trend.
Even though leverage carries certain amount of risk to a trader, it’s a facility provided by a broker. Though leverage, a broker allows you to take more risk than your invested amount. Some brokers allow you with high leverage facility whereas some others allow you with the moderate amount.
Leverage is a very important advantage provided by a broker. Leverage allows a trader to expand his trading lot size beyond the capital. But bear one thing in mind that the higher the leverage is, the higher the lot size is. Your profit will proportionately increase depending on your lot size.
Leverage is the best for those who do not have large investments but are profound in knowledge. When the leverage is low, your account is well protected and it is crucial to keep leverage low for better risk management & money management. High leverage means high risks so it’s always better to keep it low especially when you’re a beginner.