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

Jakemark posted:
See, no doubt that there is a high level of risk with high leverage but the only thing matters is how much knowledge and experience you have for taking such risks.

This means beginners should not opt for high leverage in the starting. It’s actually such a simple thing but getting your head wrapped around it seems like such a big ask. Like how easy it seems to follow the saying that ‘keep your emotions at bay while trading’ but we all know it is THE most hardest thing to do. It is not easy to trade like a bot. It’s our hard-earned saving after all that we are putting at line for various reasons - giving our family a better life, getting out of the money debt trap, list is endless…..

I know what you mean Garey. Been there, blown some accounts, but these seem like stuff that we all have crossed and if someone hasn’t, believe me you, you are closer to it :) I do try to trade without leverage though, having learnt few lessons (that’s what I at least think) to keep the amount of capital loss less. So what I do is, I keep separate accounts for different things, like I have one account with XTB in which I trade completely without leverage, I use SMA for entry/exit, something I have kind of mastered. And then I got another account with Fxview where I trade with leverage (not high) and use less of my own capital. So fxview account is more of my experimentation account, where I try different indicators. Results are mixed, whopping profits at times and a total lull at some other times. This even keeps the whole game exciting for me.

Beginners should focus more on the spreads than the leverages.

Mikehussey posted:
Beginners should focus more on the spreads than the leverages.

No, not spreads and not even leverage. They should focus more on making their strategies. After that they should think about other things.

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.

High leverage can be useful but only if used correctly. New traders often feel like taking the opportunity to open larger positions to get bigger and faster results from their trades using high leverage. But if the position doesn’t play out the way it was expected, a larger loss occurs resulting in less margin for the next trade.

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.

Leverage is for professional traders who have been in the market for quite some time and know what it can do for them. When new traders are told not to use leverage, it means that they should trade like an amateur and not a professional. Every time I trade a currency pair, I use the highest leverage possible with swissquote because I believe that as a trader with years of experience, the more leverage, the better the 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 ? :)

Honestly, I don’t see any harm in using some leverage. You can always keep it low and work your way around it. Risking less is better if you are learning step by step.

turnipfollow posted:
Leverage is for professional traders who have been in the market for quite some time and know what it can do for them. When new traders are told not to use leverage, it means that they should trade like an amateur and not a professional. Every time I trade a currency pair, I use the highest leverage possible with swissquote because I believe that as a trader with years of experience, the more leverage, the better the trades.

The way I see it, I feel like using leverage can be a big liability since the principle cost of leverage has to be paid on any transaction or trade. There is also a risk with it and a trader is always at the risk of getting a margin call.

@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.

Gleywilleyy posted:
@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.

Yeah. Leverage can be quite helpful at times. Better to use it wisely.

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.