Better to increase lot size or leverage?

Hi all,

I’m a noob trying to form an intelligent strategy before I even do a demo trade.

Aside from the amount of money I invest in a trade, there appears to be an option as to how to increase the size of the trade, and it has to do with the balance between lot size and leverage. What is a good balance between lot size and leverage? Is it SAFER to increase one over the other?

Thanks,
WMF

I reduced my leverage from 200 to 100 and dropped my lot size. As my account has grown ive increased the lot sizebut left leverage at 100

1 Like

Given a constant account balance, increasing lot size is the same as increasing leverage.

For example, if you have $1000 in your account and you move from micro lots (1000 units) to mini lots (10,000 units) you’ve increased your leverage use 10-fold.

1 Like

Question shows some confusion.However good practice dictates not to risk more then 1-2 % of your equity on the single trade . Increase your bet proportionally with increase of your equity. Stick to good practice and I promise, you are going to to have some quality time before you lose your capital and you’ll learn a lot about your system and yourself on the way.
#TradeSafely

1 Like

Hi,

Since you are getting ready for demo trading, I think the best way for you is to try what ever will come on your mind and the result will show you what is better.

Hi Eddie,

Your response appears to contain the principle I’m looking for. Perhaps you can explain why, initially, you dropped BOTH the leverage and the lot size instead of leaving one at the level it was and dropping the other more drastically. Is the way you did it more advantageous or safer in any way than leaving one at the level it was and dropping the other more drastically?

Thanks very much,
WMF

Thanks for your explanation Rhody. I see I should have made myself more clear.

The leverage aspect I’m talking about is the leverage that the platform offers, not the leverage that increases with increased lot size. Bottom line question: Does it make any difference at all, safetywise or otherwise, to increase lot size or the leverage that the platform offers, or do they both have the same effect in all aspects of the trade?

Thanks again,
WMF

Thanks for your good advice and encouragement, FXZOO. However, I hope you’re not presuming that I’ll eventually lose ALL my capital. I expect to have losing trades, but I’m also planning on being very careful about risk!

WMF

Thanks Rambo,

I’ll certainly experiment with demos on what I’m not certain about, but I recognize the value of learning from others rather than trying to reinvent the wheel.

Best Wishes,
WMF

As long as you stick your proper risk management, try different combinations if you wish and see what works best for you. You should increase your lots size if the risk profile you apply in accordance with your strategy allows you to do so i.e. with an increase in equity.

Initially I dropped both because I was incurring some large losses and wanted to put the brakes on.

The way I settled on means I can change my risk on a trade by trade or currency by currency basis just by changing the lot size for each trade. With leverage any change occurs across all trades so it is not as flexible

1 Like

The leverage your platform offers is virtually irrelevant. It limits how large you can trade - maybe how many trades you have on - but in practice that shouldn’t be much of an issue. Aside from that, it dictates your margin requirement.

Your risk is entirely tied to the amount of leverage you [I]actually[/I] use, which is directly linked with lot size.

1 Like

Hi,
According to me Increasing the lot size would be right. I would give a simple reason for my answer i.e. Mindset.
A investor who has less money and goes for increasing leverage anticipates a high profits, but due to overconfidence the analysis went wrong and he suffered major loss. He will be bankrupt.

Whereas a person increasing lot size will increase the lot size only if he has the money to do so. If the amount of money is not enough to increase, he wont go for more lots. Increased leverage means increased chances of default.

Happy Trading

Hello,

Choosing one over the other depends really how you trade/invest.

If you are a trader, then both are practically the same thing, increasing leverage is the same like increasing lot size.
If you are a value investor, contrarian, or hedger, then you are better of without leverage or with minimum leverage.

Higher leverage gives the ability to trade bigger lots (take higher risks). Sometimes using leverage potential is essential to profit from the market, but I reiterate, only SOMETIMES. As a news trader I sometimes go with bigger lots on Hotforex, because I believe a particular trade have higher odds to go in my favor (strong fundamental data, market-moving news, etc.) But I don’t use leverage without a need and scalp mostly on low lots but using 1:500 leverage. Be it high, it doesn’t always mean taking high risk because you can easily manage it reducing or increasing lot size.
It’s all about your margin requirement when we consider the meaning of the leverage. To trade 0.1 lot (10000 units) with 1:500 leverage margin requirement is 20$, with 1:100 - 100$.
I’d suggest to experiment with lot size and leverage on demo to understand importance of both of them.
It’s hard to put it comprehensive enough in theory but sure you’ll grasp it essence in a couple of hours trying in practice.
Good luck

Given the same account balance you cannot increase your leverage without increasing lot size, nor you can increase lot size without increasing leverage. Leverage = Position Size/Account Balance.

Thanks Rhody,

Seems clearer now. Just as I suspected: 6 of 1, half a dozen of the other.

Best Wishes,
WMF

Assume I want to trade E/U pair with $200-500, how maximum lot size I can trade with recent fluctuations?

Thanks LB. I think I’ve got it.

Thanks James. I’ve got the hang of it.