Maximum loss using leverage

Hello!
Learning about leverage and margins I found something that bothered me.
If I used 100$ with a 1:100 leverage and thereby traded with 10,000$ I’d have a margin of 1% and I’d give the broker 100$. Now, let’s say I have 500$ on my account, but using the 10,000$ I loose 600$ (or let’s go crazy and say 2000$), does the margin cover 100$ and I have to pay the rest with 400$ out of my account and then owe the broker another 100$ (or in the crazy case do I owe the broker 1500$)?
If so, how realistic is it for leverage to become dangerous for a relatively small account of about 500$?

Whether you have to pay for any losses beyond what’s in your account depends on your broker agreement. Some brokers won’t allow your account to go negative - though fewer now than used to be the case. Check your broker agreement.

Leverage can be dangerous for any size account, but smaller accounts tend to use it more. So it is very realistic for leverage to become dangerous for a small account.

That would depend on whether it’s a broker that offers “negative balance protection”.

In theory, it’s very rare, because it isn’t the leverage itself that causes anyone any problems, IF they know how to work out appropriate position-sizing.

That’s a [I]very[/I], [B]very[/B] big “if”.

The reality is completely different: “becoming dangerous” is actually very common indeed, not because of the leverage in itself, but because the aspiring traders who are attracted by high leverage tend to be exactly the same ones who don’t know how to work out appropriate position-sizing, who think of trading in terms of profit maximisation rather than in terms of risk management, who are in a hurry to “get trading” because they think practical trading (even if only on a demo account) rather than mastering the theory first is the sensible way forward (this is a deeply misguided belief, but unfortunately very widely reinforced in forums by the multitude of unsuccessful trading aspirants who share the perspective).

Counterparty market-makers who are pretending to be forex “brokers” (and have large numbers of customers who don’t really understand the difference between a market-maker and a genuine broker - many of whom post regularly both here and in other trading forums) have learned, from long and successful experience, that [I]the type of customer [U]attracted[/U] by very high leverage is also typically one who has a gambling mentality, is seriously undercapitalised, has a delusional impression of how quickly he can become steadily profitable and to what extent, and is exactly the right fodder for a business model which depends on having a large turnover of customers who lose[/I].

So the reality is that although high leverage is not [B][U]in itself[/U][/B] dangerous, if sensibly used, it’s also part of a very common “syndrome” in which gullible beginners with unrealistic expectations habitually and repeatedly get fleeced by scammy “brokers”.

This little article will help anyone who wants a quick, clear and concise explanation of leverage and margin.

So, after having looked and clicked through a bunch of these articles I have found that leverage can be dangerous, but rly, as long as I keep it at like a maximum of 50:1 and don’t act like a complete idiot I should be able to manage to stay afloat.
Atm I’m still trying to figure out how to buy anything in MT4 on a demo account, so it’ll be a few months until I actually use the knowledge I’m getting from the school of Pipsology ^^

It’s complicated, and I’m simplifying here, but my guess is that if you limit your [U]total[/U] risk-exposure at any one time to [B]1%[/B] of the funds in your account (regardless of what leverage you use), you might be able to manage to stay afloat.

(For what it’s worth - if anything - personally, I’d strongly advise you [I]not[/I] to commit yourself at the outset to using MT4, and at least to read this thread: 301 Moved Permanently.)

Thank you very much :smiley: I only looked at the charts and realized that when you go to the 1 month view it starts to load with January 2012…???
Well, I’ll check out Oanda and see if I can use my Kindergarten experience by throwing the money on a demo account against a wall ^^

‘Maximum loss using leverage’ that’s not true practically.

If anyone losses by using leverage it is completely with non-sense planning and zero risk management approach , nothing to do with leverage at all.

so before trading with leverage we have to make sure real risk managing plan , because leverage always contains risk.