Can't get leverage to click

Beginner Questions
1

I have read a few posts on the site and can’t seem to get leverage to click with me. Can anyone just simplify it for me? I just starting out on a demo account.

I also want to understand what sort of trader I am and I have looked at the various explanations but seem to be in the middle. I feel though that I shoud be sticking or focusing on a particular type of trading. My hours available are 9.30am GMt to about 3pm GMt and then 4pm to 5.30pm.
I am drawn to the idea of working from home and having a total career change (due to life changing experience) and as I look more into this it really starts to excite and interest me.

I have just started th babypips school.

Thank you for any guidance in advance it is very much appreciated.
M

2

have u opened a demo account? oanda and fxcm have good ones. i find i have to see something in action before it really clicks for me. on oanda you can play with the leverage options and make trades to see how it affects your balance and how much money you are actually using in the trade.

Leverage and Margin Defined | The Number 1 Cause of Death of Forex Traders | Learn Forex Trading

3

Hi, yes I have opened a demo acc with fxpro and barclays have also been in touch but I don’t know enough to make an informed choice.
Thanks for the link

4

you know, i wouldn’t worry about it too much. once you understand it, you’ll not worry about it, and you won’t even think about it or pay much (or any) attention to it. in the end, it really won’t be a significant part of your trading - you’ll most likely just trade by putting on a position of a certain size, entry to exit, and move on.

watch out for analysis paralysis!

i mean, i don’t even think about or pay any attention or bother to learn the margin requirements for my trading. my positions are sized appropriately for the length of my trades, and i never ever have to worry about just how much or how little margin i’m using or if/when/how a margin call could/would happen. really, if someone has to worry about that, they’re likely trading FAR too aggressively.

5

Hi! understanding leverage and position sizing is (I belive) one of the most importent things to understand! Andwhen you get your head around it it is actually really simple :slight_smile:

Basically, Leverage only means how many trades/positions/units you can have on at any given time, and if you stay within 2% risk, you probably will never notice it(I dont), except if you open up a lot of trades.

Leverega does not come into play when you place a trade at all(except when you have a LOT of trades placed).

So the next step is Risk and position size, basically, to be able to know your risk and calculate anything, you have to know your Stop Loss.

So for example you have a 25pip SL, a 500$ USD account, trades only USD based currencies, and risks 2%.
2% of 500$ is 10$.
remember, 25pips equals to 0.0025$, so if you bought 1 unit, and it hit your stop loss, you would loos 0.25 cents. so basically to get your unit size, you just divide your risk, 10$with your stop loss, 0.0025, that turns into 4000 units.
If you buy 4000units of for example EURUSD, and it moves against you and hit your stop loss, you would loose 4000 * 0.0025 = 10$.

Hope you understood that, it actually is really simple(it gets harder if you trade for example AUD/CAD or something different from /USD but you can just use babypips position size calculator to fix that…

anyway, here is the equation:
Units = Risk / StopLoss
10 / 0.0025 = 4000

And as always, most trading software requires you write units as Lots, and 1 (Standard) Lot is 100 000units.
4000 / 100 000 = 0.04 Lots

Good Luck!