To me leverage is immaterial. It’s just a tool to help you get in a trade with less money. If you use 1:500 leverage, it does not mean you will lose $500 for every point the market goes down.
The real question is how big a STOP LOSS you use as a percentage of your Trade Account size. Using improper percentage as your stop loss is the real killer for most traders.
I use 2% max as my risk capital for each trade that take. When I trade ES with two contracts, my stop loss is set at 2.5 points from my entry. Which means I have 2x2.5=5 points x $50=$250.
To backup this trade, set with $250 risk money, I have $12,500 in my account to keep my risk tolerance not to exceed 2%.
Think once again, is the real killer Leverage or Risk Tolerance ?
I agree with the gambler part. Once you let your emotions to take over your judgments you are most likely going to lose everything, especially if you have higher leverage. IMO 1:200 is high enough for forex. An option for 1:400 for some of the major pairs would be great too. But what I would like more is to be able to get lower leverage like 1:20 or 1:10 for example if I want to decrease my risk.
It is all personal choice. It depends on the capital, number of EAs, experience. I am more conservative on the leverage and I go with 1:20. I think we should not be greedy having a lot of profits. Do you agree that having smaller leverage is a tool to avoid greed?
This is totally your personal choice. It depends on the capital, experience you have and trading strategy you’re using. It is always better to start with low leverage ratios so that you can avoid huge losses.
I’m not very familiar with leverage - trading with a UK-regulated firm I am restricted to 1:30 for the major forex pairs and 1:20 for everything else I have so far checked.
So if your leverage is at 1:200 and you want to set your capital risk per a given trade to 1% of your account capital, with a stop-loss at 72.5pips from entry, is this practicable? What are the problems?
I have started using 200:1 this year with turnkeyforex after playing it way too safe with maximum 10:1 with icm for a very long time. Ultimately came to realise that why not use a privilege that is given to us. Once you have the experience to understand risky trades from sure-profitable ones, there’s no harm in using high leverage.