Leverage....
Results 1 to 4 of 4

Thread: Leverage....

  1. #1
    Is to stay away from anything greater than 100:1. What does it matter? I know that my bank roll and that I know for every 10k traded it's worth approx a pip (based upon the currecy pair) and that I'm liable good or poor of that. What does it matter that you need to reserve approx $100 to exchange 10k worth of this EUR/USD with 100:1 or that you need to reserve approx to exchange 10k worth of this EUR/USD with 400:1? The only issue I see is in case you didnt know the consequences and did not have the money managment skills to restrain the equity left on your account thats avaliable to use whenever you are in a trade. I adore the extra flexability and use 400:1.

  2. #2
    Quote Originally Posted by ;
    All I hear is to keep away from anything higher than 100:1. What does it matter? I know my bank roll and I know for every 10k traded it's worth approx a pip (depending on the currecy pair) and that I'm responsible good or bad of that. What does it matter that you have to book approx $25 to exchange 10k worth of this EUR/USD with 400:1 or you have to book approx $100 to exchange 10k worth of this EUR/USD with 100:1? The only issue I see is in case you didnt understand the consequences and did not have the money managment skills to restrain the equity left on your account thats avaliable to use whenever you're in a trade. I personally use 400:1 and adore the extra flexability.
    Howdy neighbor,

    I concur with your assessment. Leverage and risk are separate issues. The amount of leverage you take on increases your ability to take on greater risk. . .it does not create a trade any more/less risky.

    On the other hand, position size is correlated to risk. The bigger your place to account size ratio, the higher your risk.

    Simple as that.

    Today, you might be intense your own interpretation. Thus, if you did not have control over your tendency to take on greater risk, having higher leverage makes you vulnerable to abuse. . .as with something, whether it be alcohol, food, sex. . .whatever...

    Point is, you would not give a recovering alcoholic alcohol in the event you wished to help him. . .would you? So merely having the leverage can lure risk-takers to take more risk than they ought to. This is normally where the argument gets a little blurred.

  3. #3
    Obviously the transactions have similar risks whatever leverage you're using. One matter is independent of another. However (because mrmikal says) how big your position is correlated with the risk. Having a 400:1 leverage the risk of reaching your margin is greater than with a lesser leverage, the same kind of occurs with mini-accounts. You can't maintain your position if you're trading close to your margin, the risk of having your position automatically closed is overly big.lt;? xml:namespace prefix = o ns = urn:schemas-microsoft-comfficeffice /gt;lt;ogt;lt;/ogt;

  4. #4
    The simple solution is this. By applying the maximum margin (400:1) potential, you
    conserve your trading capitol.

    If you also RESTRICT your trading to a specific portion of your accessible
    equity... to a few sound quantities of 1 Lot (at the $10,000 Lot
    dimensions ) or 5 percent to 8 percent MAXIMUM... you get the best of all worlds.

    This gives you lots of space for a trade(s) to move against you and make
    draw down (unrealized loss since the transaction moves the opposite direction of
    your place ), in which your available margin shrinks before the transaction goes back
    in your path and sets you into profit.

    I utilize 400:1 since it will allow me to place additional lots into trade
    with my accessible account balance, but within the parameters said.

    A way to understand whether you're safe... choose the amount of lots you have in play
    and divide that amount to your AVAILABLE MARGIN.

    Example: $2500 available margin divided by 10 lots (at the $10k lot dimensions )
    and you have 250 PIPS OF MOVEMENT until you'd be margined out.

    Is that safe? It is whether you can state the market you're trading can't move
    250 pips AGAINST YOU in the trade you're in, before return to where
    you require it to go to put your trade in profit.

    Less than 200 pips of space... you're trading too heavy.

    Have a fantastic trading existence....

    Jim

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  
This website uses cookies
We use cookies to store session information to facilitate remembering your login information, to allow you to save website preferences, to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about your use of our site with our social media, advertising and analytics partners.