Couple of months ago I deposited $250 and gain some small profits. Then I used high leverage and lost $200.
Since then, with my remaining ~$50 balance, I stopped using extremely high leverage and with small profits I got everything back to my initial balance of $250 yesterday. Finally. It took me more than a monthā¦
But I educated myself, learnt from my mistakes and gain some knowledge, experience.
Donāt use high leverage, donāt be greedy, donāt freak out if it goes against you, use SL and TP, donāt monitor your trade too much, take a break, donāt get upset, and donāt lose motivation.
Felt like sharing my feelings, thank you for reading! I know itās not much money but this is how we learn I guess?
I was a little sad when I lost $200 and looked at my balance of $50ā¦ But didnāt lose motivation, didnāt quit. I love Forex trading, even if Iām not making any money, and kept telling myself that this is how we learn from our mistakes.
Agreedā¦ just donāt trade with extremely high leverageā¦
Well, boring or not, this is the most important step you can take to avoid losing your hardly earned profits. I learned this the hard way, I guess thatās why itās recommended to take courses before starting live trading.
I usually set my SL based on resistance and support. I always try to find its right place. Itās not about wide or tight. So basically no, I didnāt set my SL wider.
And I started using small leverage 5x - 10x and small risk ratio of course. I just simply didnāt want to risk too much again and wanted to be more careful since Iām only a noob. I always set my TP farther and try to stick to the same lot size.
I didnāt change my strategy and style. I trade at the same time every day. I just reduced risk and stopped using high leverage.
I mostly trade 0.01 and 0.02 lots. I might increase this to 0.03 to see more money flowing.
Since I didnāt change my strategy (because I like this one and it suits me) I didnāt consider putting SL further. I always use set my SL based on resistance and support. So my SLs are not further than before.
For the sake of clarity, we should remember that the level of leverage does not in itself have any impact on your risk exposure at all. Whether you have a leverage of 10:1 or 100:1 or 1000:1, your risk per pip of price movement is entirely due to the size of your position. If you have a trade of 0.01 lots (one microlot) of EU then your risk is about 10c per pip whatever your leverage is. The only impact of leverage is how much (or how little) of your account balance is reserved as initial margin.
High leverage is only a problem when it is used to open (excessively) larger positions for the same amount of margin. The key risk that every trader should focus on is the monetary amount of the potential loss that they are exposed to. By using leverage to open larger position sizes increases proportionately the value per pip of price movement. This is one of the reasons why we have the coming ESMI reductions in maximum leverage (e.g. 30:1 for retail traders in major currencies)
Do you mean a leverage of between 50 and 100:1?
The ESMA limit of 30:1 will mean an increase in margin per 1 microlot of EURUSD to around 40$
(depending on the EU rate). So a position of only 5 microlots will already need a minimum of around 200$ to even cover initial margins without any cover for adverse price movements. This shows how almost impossible it will become to trade with (or recover from) an account with very small balances.
Sorry, I meant to say 5:1 - 10:1 leverage. I think thatās still safeā¦
Anyway, the ESMI reductions wonāt affect me because thereās no point trading with high leverage. Itās too risky, even if youāre ā100% sureā about your speculation haha.
My balance is $250 now, letās say I will trade 0.03 lots. Thatās 3000 / 250 = 12. So the leverage is 12:1 right? I also like to call it multiplier.
High leverage means that your broker only reserves a small balance from your account for initial margin and vice versa. Lowering leverage means that your broker will lock up a larger amount of your free equity against your position. Leverage is the measure of what proportion of the nominal amount of the position size is locked up, not the ratio of your total capital to nominal value.
For example, if your leverage is currently 200:1 and is then reduced tp 30:1 then your margin requirement increases by 6.67 times:
An example:
1 mini lot of EUR/USD = 10,000 units
If we assume a price of 1.17000 then your margin will be:
With 30:1 leverage (as with ESMI) = 10000 / 30*1.17 = approx 390$
So for each microlot that you open you will need to have an initial margin of approx 39$. So 0.03 lots is going to need an initial margin of approx 117$ compared with an initial margin of approx only 18$ with a typical 200:1 leverage. This is a big chunk out of a 250$ account size just for the initial margin.
This is why leverage is such a big risk if it is abused - because with the same amount of capital, with a leverage of 200:1 you can open a position size that is 6.67 times larger than with a 30:1 leverage
I just checked my trading account on my brokerās website and the leverage is set to 500:1.
I might sound stupid nowā¦ butā¦ if I lower the leverage to 30:1 on my account, then opening a position with 0.03 lots will be different in terms of margin and the value of one pip?
I have been trading like this (500:1) since the beginning. I always use BPās Size Calculator tool to measure the risk. I enter a risk ratio of 2 or 3 or 10%, SL between 30-60 pips. Then it gives me how many lots I should trade. Remember on my account 1 lot = 100,000 units (this isnāt a micro account). I always felt like Iām not risking that much, based on my calculations and BPās Size Calculator.
Yes, the initial margin locked away will be much biggerā¦
No, the pip value will be the same (30c) whatever your leverage is set to. Pip value is only calculated according to the nominal value of the position. Three microlots is 3000 units and is nothing to do with level of leverage. Leverage only affects how much ādepositā the broker reserves against the risk.
@Mordengaard are you still trading that iqoption account ?
I have that as a practice account and youāre never going to understand āleverageā using their platform. They have āAmount betā and āMultiplierā both of which you set yourself. (Mine are both set at 50) When you bet, the "Account balance goes down by Ā£200 on mine and stays there until you cash out, when the $200 is added back and your account is adjusted by the Amount you have won or lost.
Whatever āAmount you betā, they work in āpercentagesā and it is Very difficult to judge exactly how many cents per pip you are actually betting.
That is not the same as margin and tbh - Iāve given up trying to relate the two ! How, or IF even they are going to cope with the new regs I havenāt a clue !
But then āForexā seems to be an afterthought, Added on to their Binary Options base model.
You need to be on one of the mainstream brokerages to understand what @anon46773462 is talking about. (or at least, to relate it to your own account ! )
It took me more than a monthā¦
Sounds better.
