I am not trying to prove any one person right or wrong. I would like more info for people who have a trade style that leverage would make a difference one way or another.
I will make this my second test. I have apposing views on this matter. I have no idea one way another.
rhodytrader, you are a wealth of help.
Thanks!
Leverage has only one purpose - to allow you to take on larger positions than you could if you were only using the money you had in your account. Thatâs it.
Thank you. I appreciate that.
You forgot the other two nefarious purposes of leverage: to entice people into the world of forex and to confuse the hell out of newbies
colin,
You are so right.
hey rhodytrader. thanks for the oanda tip. im lovein it.
Thanks for your replies everyone! (Especially rhodytrader - I think I understand leverage a lot better now )
I know i have not been involved in this thread at all but i could not help but notice how complicated some people are making leverage out to be.
I must echo rhodytraderâs thoughts on this. When using leverage it is absolutely critical that you know the effect in can have on both winners and losers, but thatâs about it. Itâs meant to give your buck more bang on both sides of the coin. Period. Nothing more nothing less. And FOREX just happens to be the best market to allow you to do it with most flexibility.
I donât think traders should dwell on it more than that. Think of your trades and calculate your position sizes in terms of percent of your account risked per trade and leverage takes care of itself. It really is that simple.
Someone once said: âTrading is inherently simple, getting to simple is whatâs complicated.â
Great point! LOL
Couldnât have said it better myself.
My brother (who is learning my trade style) said âfunny how every ones opinion is stuck in 1st gear.â I told him your view on leverage keeps your account balance safe. He knows I respect your thoughts and opinions. Please forgive by brothers ignorance. (my brother is no longer happy with me)
There is another side of leverage that the very greedy see. The more fearful refuse to see. I do see it and fear it. I believe I am greedy and fearful at the same time. I guess in respecting leverage, I can use it and not mess up my whole world.
I do know, and use, more than one trade style that works better if the leverage is the highest available.
I understand lower the leverage the safer the account balance.
Back on post #20 I should have never used the word risk. (I understand caps is bad on this forum so I underlined) I was successful helping at least three of the people I have reading these posts. I have invited a number of people to joins the forums here at Babypips.com. On has joined and not posted. The others a afraid of being attacked. I tried to tell them that stating an opinion is not an attack and the atmosphere is a good one here at Babypips.com.
I can definitely appreciate that youâve helped people. Personally, my own initial struggle with the concept of leverage only worsened when i tried to calculate profits and losses using the amount of leverage. All these calculations on this thread have become largely theoretical to me and really matter very little to me on a trade by trade basis. Leverage is there and conceptually i know what it does. Thatâs all anyone will ever need to know.
Who cares how much leverage a broker offers. 100:1, 400:1, 10000000:1âŚNewbies are really only attracted to these figures for nothing more than pure greed â that is until they truly grasp the idea of percent risk and âtrue leverageâ. That is really all that is needed.
My quest to understand leverage beyond that ended when i started planning my risk on a percent basis.
So, if i have a $10,000 account, i have to decide how much of a percentage i want to put on the line. Say itâs 3%, which is high in my opinion. How many contracts must you trade given a certain stop loss and given that you are trading a mini account where pip values are 1.00/pip. From there you can determine what your true leverage is. Start with percent and then determine what your leverage is. I never work from leverage backwards.
So, if i trade an idea with a 40 pips stop loss, pip value 1$, 3% risk.
Essentially you are risking $300/(40pip stop)(1$/pip) = 7.5 contracts (7)
With 7 mini contracts you are controlling $70,000 of currency on a 10,000 account, making your true leverage 7:1.
Why does it have to be anything more complicated than that???
Maybe we are saying the exact same thing, iâm not sure. If we are then accept my apologies for getting lost
I like that many of you have posted. You all have your own way of explaining leverage. I anyone else has a different way to explain leverage, PLEASE post. The more we do this the more we help people who are only reading and not posting or even a member. 
Thanks to all! :
Ok, Iâm looking at both demos at this very moment.
I see that the profit or loss is the same dollar amount. The premiums are the same. As far as I can tell, everything is the same except usable margin and used margin. The 200:1 used $96 and the 400:1 used $48.
In one of my live accounts, I have 185 trades open. No pending orders. No stop losses. No limits. And Iâm sure most people will be surprised to know I have only 1.9% used margin. Remember, 185 trades open. Now if I were to drop the leverage down, the usable margin would go down, the used margin would go up, and I would be very unhappy. 
I have used 50:1, 100:1, 200:1, and 400:1 leverages. I have greater profit (and/or loss) at 400:1. I have never margin called a live account. I do not recommend any one do this with out a great understanding of why and how I do it. My trade style is nothing like other peoples. I think the pips and ROI is an indicator of that.
If you argue till you are âblue in the faceâ ( I canât believe I just quoted my mother ), I will continue to trade as I do with the pip and dollar profit that I get.
Love to all your families from my family.
I am very thankful to every one who helped.
My work is complete on this thread.
You and I are definitely saying the same thing. Canât speak for anyone else. I just happened to have used the term âeffective leverageâ where you have used âtrue leverageâ. Same thing, though.
Hmm!
Letâs see. If you had only like $5000 and you wanted to use 1 standard lot, I could see how 100:1 or higher leverage could be risky. But is it risky because of the high leverage or because your trade size is so much larger than your account balance? If your trade size is large, the greater the pip value is and the more you could lose or gain. I think the problem here isnât the leverage in itself but the fact you have low margin using a large trade size. Even small pip changes could eat away your margin. However, what if you had $100,000 and still only used 1 standard lot. So your trade size is fixed but you still use 100:1 leverage or higher. So 100:1 leverage would be $1000 used margin deposit. So you have $99,000 of available margin so you could lose 9900 pips before a margin call. A 1% risk of your total margin would be $1000 or 100 pips. 1% is a pretty low risk of your account. However the leverage is still high, isnât it. So it is really about how close your margin balance is to your trade size. In this case, high leverage allows you to have more usable margin. If you did 50:1 there wouldnât be any benefit and you would have less usable margin. Since you have $100,000 and the trade size is $100,000 I suppose you could think that is 1:1 leverage or no leverage even though you leverage 100:1. So in cases where your account (margin) is close to your trade size, it seems higher leverage might be better since you have more usable margin. Iâm still learning so much all the time but these are my thoughts.