Leverage Question... HELP!

Im quite a NewB to forex and am still a little confused on the leverage thing.

I know there are 3 types of Forex accounts. Basically heres my question… How much initial investment do you have to make to trade at 1$ a pip, 10$ a pip, and 100$ a pip? Does anyone ever trade at 100$ a pip? I mean… if someone was very good with the system and could gain an average of 10 or even 5 pips a day, what would stop them from trading at 100$ a pip all the time?

Systems fail some of the time, or all the time if there is a weekness in it.
If you are at a brokerage with 100:1 leverage, approximately, $10000 controls one million dollars and $100 a pip. That’s not in my league, but if you got half a million to work with, and some basic knowledge, then go for it, more power to you.
What would you trade if you divided your cash into 50 lots and used one or two lots at a time? What if you are wrong, can you afford to lose any of the cash or margin?

I use 400:1 leverage. :cool:

For the reason stated above.

:slight_smile:

It all comes down to the leverage you use. I’ll take $10/pip for EUR/USD as an example. For that pip value you need to trade 100,000 of a non-USD base pair (GBP/USD, AUD/USD, EUR/USD), which is a full lot. At a rate of 1.30, 100,000 EUR/USD is worth $130,000. Here’s what your “investment” would have to be at different leverage rates:

10:1 - $13,000
50:1 - $2600
100:1 - $1300
200:1 - $650
400:1 - $325

Keep in mind that higher leverage implies higher risk. Divide the above figures by $10/pip to figure out how big an adverse move could be suffered before completely wiping out the margin deposit. For example at 200:1, it would take 65 pips.

Also my lot size controls only $1,000.

When ever posible I trade with only 1 lot.

This keeps used margin down, and usable margin up.

Keep in mind if you trade with more than 1 lot you will increas you risk greatly.

Always trade on demo first.

:slight_smile:

Thanks for doing the math rhodytrader. That’s the part that sucks for me. When ever I have to do math, to give an example, I try to keep it simple as posible.

[B][/B]

wasupnow:

High leverage is one of the main culprits for wiping out accounts. To get
a complete understanding of how this can be done, read through the
information on this site. A good understanding is essential BEFORE you
begin trading with your own money.

Thanks for the info everyone. Appreciate the help… trying to get ahold of this!!