10:1 leverage is MINIMUM???
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  1. #1
    Join Date
    Dec 2006
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    Default 10:1 leverage is MINIMUM???

    hi guys, i am a newbie in FOREX. I just went to online chat with an Oanda customer service and learned that the minimum trade leverage is 10:1

    i was taken by surprise as I thought there would be 1:1 leverage available but apparently there is none at Oanda.

    Does anyone is any broker provide 1:1 leverage or does it not exist???

    sorry, but i am really confused between standard account, mini account, micro account, leverage and such things........

    please help. thanks alot.

  2. #2
    Join Date
    Nov 2006
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    12
    For Oanda, there's no minimum leverage you have to worry about. If you want 1:1 leverage, just trade 1/10tht the units you normally would, and there you go. You can even trade $1, convert it into .76 euro, and you have half a trade. Oanda is one of the only traders that doesn't have mini/micro accounts for that very reason. They let you trade in units, not lots. Go to whatever broker's website you want and read about the difference between their standard and mini accounts. Usually mini accounts have higher leverage and let you trade mini-lots, or 10,000 units of a currency instead of the usual 100,000.

  3. #3
    Join Date
    Dec 2006
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    124
    Hey there Conan.
    In addition to what Jonjon said, you might wanna as yourself if you fully understand the meaning of leverage. 1:10 is a very low leverage. you gotta have a lot (more than 10,000$) in your account just to open a single trade on a standard lot. I'd strongly recommand reading this before taking any actions. Babypips.com have made an excellent job explaining leverage with its positive and negative aspects.

  4. #4
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    Parpush, excellent recommendation to read our leverage question.

  5. #5
    Join Date
    Dec 2006
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    Hi everyone,

    Even though i tend to plan my position sizes based on a fixed percent risk rather than leverage, i had a question about leverage specifically.

    If trading 1 standard lot of 100,000 units on an account balance of $1000 represents the insane leverage of 100:1, i fail to see how any trader can actually achieve leverage surpassing 10:1 while observing a conservative percent risk of say 3% per trade.

    I'll use a numerical example to illustrate my thinking:

    Say someone has an account balance of $3500 and decides to risk 3% of that capital on a trade. Assume further he is trading a MICRO account where each pip is worth 0.10/pip (or 1000 units per contract). This particular trade will have a stop-loss of 40 pips. The first thing i do to determine final leverage is figure out how many contracts this trader must put on.

    3% risk is $105, so the formula to determine contracts in this case is as follows: $105/(0.10/pip)(40 pip stop) = 26.25 or 26 contracts

    So, if i am trading 26 contracts or 26,000 units on an account of 3500, then the leverage on this trade is 26000/3500 = 7.4:1

    What am i missing here? It seems to me that 10:1 leverage would represent a much higher percent risk, would it not?

    Thanks for any insight

  6. #6
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    Babypips does an excellent job explaining everything about FX which is why I recommend it to so many people that want to learn about it.

    Quote Originally Posted by pipdiddy View Post
    Parpush, excellent recommendation to read our leverage question.

  7. #7
    Join Date
    Dec 2006
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    184
    Just to add to my previous post...

    I posted this question about leverage because a previous poster said that 10:1 is very low leverage. Looking at the example i gave above would seem to suggest that 10:1 is actually highe leverage in that you would be risking more than 3% per trade.

    Again, please enlighten me if i am wrong here

  8. #8
    I couldn't agree more. I think babypips hits it right on the nail. DON'T TRADE SMALL.

  9. #9
    Join Date
    Dec 2006
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    184
    sorry, forexcranium, i'm not sure i understand what you mean when you say "don't trade small"

    Even if you traded standard lots, the calculations remain the same. 10:1 leverage, as far as i understand it is high leverage, almost too high.

    Let me re-explain using standard lots. If i had a 50,000 account balance and i wanted to take a trade with a 40 pip stop loss, while not risking more than 3% ($1500 risk) of my balance.

    This means i trade 1500/($10/pip)(40 pip stop) = 3.75 contracts or 3 lots (rounded down)

    So, with 3 lots i am controlling $300,000 worth of currency on a $50,000 account. So the leverage is 300,000/50,000 = 6:1

    Now, assume i wanted to risk 5% of my account balance on this same trade. Using the same calculation as above, i would now be trading 6.25 contracts or 6 rounded down. That's controlling 600,000 of currency on the same 50,000. So, 600000/50000 = 12:1 leverage.

    So, my question remains...isn't 10:1 leverage a little excessive. Afterall, it means you are risking between 4-5% per trade. I would consider that the upper limit of risk on an individual trade.

    Am i getting this right or am i out to lunch?

    Thanks

  10. #10
    Join Date
    Dec 2006
    Location
    Washington
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    213

    Default Hey Pipbull

    Pipbull your right, but what happens when people want to have more then one open position at a time? This is the case where I would see a benefit to high leverage.

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