High leverage = High risk?

LyudmilLukanov posted:
New traders should not use high leverage in trading. Traders need to control and minimize the risk for using high leverage.

But it is so darn appealing I say :) why not risk some

marco_mmbiz posted:

unsightlydray posted:

78678676 posted:
A higher leverage is way too risky, specially for a newbie who can end up getting himself trapped in a bad debt.

Debt?? I don’t intend to take up a loan for trading, as wrongly (I think) suggested by a friend!

Actually 'leverage' just means that you'll get a 'credit' from a bank or liquidity provider of the broker. A max. account leverage of 1:500 means that you can trade with a maximum of 500k per trade (!) while you'll only throw in 1k of your own money. But if you'll lose 2k in that trade, where does the other 1k come from then? Right, it comes from your deposits (and that's how can get into debt). Most professional brokers have a negative balance stop out. But the higher your leverage the higher the chance you'll get to this stop out.

But I won’t be owing anything more than my initial credit right? Or am I wrong here...thanks for your reply

unsightlydray posted:

marco_mmbiz posted:

unsightlydray posted:

78678676 posted:
A higher leverage is way too risky, specially for a newbie who can end up getting himself trapped in a bad debt.

Debt?? I don’t intend to take up a loan for trading, as wrongly (I think) suggested by a friend!

Actually 'leverage' just means that you'll get a 'credit' from a bank or liquidity provider of the broker. A max. account leverage of 1:500 means that you can trade with a maximum of 500k per trade (!) while you'll only throw in 1k of your own money. But if you'll lose 2k in that trade, where does the other 1k come from then? Right, it comes from your deposits (and that's how can get into debt). Most professional brokers have a negative balance stop out. But the higher your leverage the higher the chance you'll get to this stop out.

But I won’t be owing anything more than my initial credit right? Or am I wrong here...thanks for your reply

Just read my post again.
Here's also an interesting read for you: https://www.earnforex.com/guides/can-forex-trading-put-you-in-debt/

Let the traders make their own decisions. Trading is not about following the footprints of other traders. It is about paving your own way to reach success and that can be with or without leverage.

marco_mmbiz posted:

unsightlydray posted:

marco_mmbiz posted:

unsightlydray posted:

78678676 posted:
A higher leverage is way too risky, specially for a newbie who can end up getting himself trapped in a bad debt.

Debt?? I don’t intend to take up a loan for trading, as wrongly (I think) suggested by a friend!

Actually 'leverage' just means that you'll get a 'credit' from a bank or liquidity provider of the broker. A max. account leverage of 1:500 means that you can trade with a maximum of 500k per trade (!) while you'll only throw in 1k of your own money. But if you'll lose 2k in that trade, where does the other 1k come from then? Right, it comes from your deposits (and that's how can get into debt). Most professional brokers have a negative balance stop out. But the higher your leverage the higher the chance you'll get to this stop out.

But I won’t be owing anything more than my initial credit right? Or am I wrong here...thanks for your reply

Just read my post again.
Here's also an interesting read for you: https://www.earnforex.com/guides/can-forex-trading-put-you-in-debt/

Thanks, I’ll go through it.

Choosing the right leverage for your trades is not a one size fits all circumstance. It depends on how much capital you have and how much you are willing to risk. As a beginner, instead of looking for the best leverage you can use, you must focus on what you should know when you start forex trading.

For me, leverage is the way of reducing the amount of trading capital that must be used. It also releases the trading capital for other trades.

Paulbraighte posted:
Choosing the right leverage for your trades is not a one size fits all circumstance. It depends on how much capital you have and how much you are willing to risk. As a beginner, instead of looking for the best leverage you can use, you must focus on what you should know when you start forex trading.

And won’t that include how much leverage to use ? :)

@Garey I used to think that too but when I actually used leverage, it kind of increased my capital efficiency. It also works well during low volatility periods. I was recently trading with ib and I worked with some highly leveraged positions but the result was pretty good so there’s that. I think there is more to leverage and we can actually use it for our benefit. Just sharing my 2 bits here.

Daniel993 posted:
High leverage is considered a risk because the loss value is more than the invested capital, but it is also an advantage to use high leverage because the profit earn is doubled.

Yes, it is totally up to the skills of the trader, how leverage is used.

high leverage not high risk always if you know how to manage risk ,
 because most of the time we trade with no analysis , as a result we become loser.

AmDiab posted:
high leverage not high risk always if you know how to manage risk ,
 because most of the time we trade with no analysis , as a result we become loser.

Trading without analysing the market? That would be like a death sentence for the account :)

BarronLucas posted:
Using high leverage does have higher risks and possibilities of blowing up your account.

When a trader uses high leverage and losses in a trade the loss is higher as the leverage and would be difficult for the trader to invest in the next trade.

But using leverage with a proper market research and analysis would do us good right?

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

Have you ever lost a lot of money like this?

Numero, It’s right that forex investments offer potential profits but at the same time, also have downside risk. Sometimes, you may lose more than the value of your transaction when trading on margin. But if you already have been in the market for some time and have learnt risk management, things can get easier for you. My first leverage ratio was 1:5 with oanda. I got an idea about using it and in my next trade, I increased the ratio to 1:50. It turned out to be a profitable trade later. Had I not taken the risk, I would have not made that much.

That is exactly my thought. Without making calculated bold moves, making money can be near impossible in the forex market. Or any other financial market to think of it.

mortanlais 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

Have you ever lost a lot of money like this?

I am sure there’ll be mixed responses for this. Some traders would have gained heavily while some would have lost it all, would ultimately depend upon every trader’s strategy used isn’t it?!

'High leverage does have higher risk involved but using high leverage also has benefits because the profit earned is higher than the invested capital in a trade.

But high leverages are mostly used by experienced traders that take risks and place accurate or profitable trades.'

The market moves can be quite unpredictable. But if you won’t take risks, you won’t be able to make profits. If not high leverage, you can start with using low leverage and increase it with time. It is better not to take risks when you know what the clear result will be.