I agree with most of the others and would like to add a few basic rules that I was taught.
Your Risk/Equity Management Plan should be established before you begin trading and you should stick to it.
Your trade maximum risk should be established at 1% - 5% of your equity depending on your account(s) size and your risk tolerance. Likewise, your leverage should also fall within your maximum risk boundaries. You may trade below you max %, but never exceed it. Your trade size will dictate your lot size and leverage. If a standard lot is too big, lower it to a mini or micro lot. If leverage is too high, lower it. A risk/reward ratio of 1:2 is a good place to start for leverage.
Nietzsche said " a man without a plan is not a man". Of course women are also included. From what Iāve been taught, I would say a good Forex trader needs a plan with solid risk management that must be followed. The flexibility in the plan comes in the conditions to initiate a trade, but one must also maintain a consistent entry/exit strategy.
I am not trying to preach to the initiated, but I would expect that we have a lot of seekers here.
I donāt think leverage is the killer. Itās people trading with bad risk management strategies.
100% of forex traders will experience losses. The art is mainly in figuring out how much risk you are willing to tolerate and taking the proper precautions to mitigate losses. This includes settings stops, setting limits, being aware of the economic calendar, being aware of multiple timeframes to notice broader trends, and most importantly only risking a small percentage of your account at once.
I think as everyone has pretty much pointed out, leverage is a tool which in itself is neither good or bad by definition. That being said, I think itās correct to assert that given a non experienced trader without proper psychological barriers, which is the case for most beginners, leverage is both unnecessary for the learning process as well as dangerous to the account value.
Leverage is not a killer it is the trader that is at fault. In use of leverage it is by choice the higher the leverage the more risk you need to control. You need to be an experience trader to be able to succeed with high leverage but when you have less knowledge of the market and you dive into high leverage then is like signing your death.
How to use leverage depends on the trader it self not that leverage is a killer . Leverage can also be very beneficial if the trader apply due management process.
it is not a killer. it is a tool. you can use it fore make money. but you can get big lose when you use it. we need plan for control our leverage. when we can control it. we can make more money
Theoretically, in forex trading leverage is a necessary. In this case I think that leverage is important for maximizing profit but it can make a trader lost even all money. Depend on the trader to trade with the lot size measurement.
The Forex is risky and lets assume that the rate of risk is 1, if you use leverage 1:50 the risk rate is 50 and if you use 1:1000 then your riski is 1000 that means you are in danger but if you combine risk and potential risk maybe sometimes get a huge profit with low investment. In my opinion The best is 1:50 nothing more but maybe less
Leverage helps both the investor & the firm.However, it comes with greater risk. If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it wouldāve been if the investment had not been leveraged - leverage magnifies both gains and losses. In the business world, a company can use leverage to try to generate shareholder wealth, but if it fails to do so, the interest expense and credit risk of default destroys shareholder value.
No its not, it depends on the way trader utilises it, a wise trader will use it only when he is sure of the movement, he wont take decision just for the sake of money.
> Do you agree with me that leverage is the killer ?
ā> I agree!
I donāt agree , whatever your leverage it depends on how you are smart to deal with it
i donāt think it is killer i goet leverage 1:500 in liteforex. i think it is great. we can get higher buypower. but you need control your trade. because we can buy with small. you can buy with small volume with your plan. but when you get great chance in market. you can buy with more volume. you can get big profit.
In order to use high leverage like 1:500 & to make profits over & over again without losing what you madeā¦ you have to be a genius / super expert.
Hello Subake, I think if you are really looking to make profits, then you may have to think carefully when leveraging. 1:500 may be ok for a person with a fat trading account. However, for small accounts I would suggest identifying the optimal leverage level. For instance, 1:500 is fantastic for a person with 100k account. However, for 1k account, it may be wise to leverage 1:5.
Leverage is not the killer but it depend on how to use it, many traders are lured by the high leverages offered but they forget about the risk involved in it.
Does this has the same result:
- trade with small leverage and high lot size (for example: eurusd, 1:50, and 2 standard lot size)
- trade with big leverage and small lot size (for example: eurusd, 1:100, and 1 standard lot size)
?
Which of these two trades has higher risk and wipes out your account quicker? Which will hit margin call sooner?
This depends on how accurate you areā¦
The other way you can trade with such a leverage without risking much is via micro-lots, where one lot=$0.01, comparing this with a standard lot, it is the same as 1:5 leverage.
Nonetheless, It is true that only a crazy genius would be successful with such high leverage. As for the average traders, it is possible to be out of the market within a month.
It is more like greed is the killer not leverage, because it is greed that will make you use a leverage of 1:100 on a single trade knowing fully well that you can loose your account with such a decision if the market goes against you.