Hi Guys !
I have a Live account with FOREX broker Pepperstone here in Australia.
My account has a balance of $70 which I’ve grown from a $50 balance. My dilemma is I can’t place any more trades on other pairs with the leverage of 30:1,. I trade on the Weekly time frame with 0.01 lots.
Just wondering if I had a Lower leverage would I be able to have more than 1 trade ?
Also what brokers offer lower leverage of 1:1 or 5:1 ?
Regards,
Bob
It would be wise to Google your requirement as there are many, that also take residency into account. You could try Global Prime, although most brokers Major FX pairs starts at 30:1 leverage.
Your equity is $70. Leverage ratio is 30:1.
The first thing you need to know is your Margin Requirement displayed as percentage.
It is 3.33%
You said you use 0.01 lot. Let’s assume you trade EURUSD and current price is at 1.5000.
The margin your broker will require for a position to be opened on that trade will be $49.95.
That will leave you with only $20.05 usable margin to trade . This is why you cannot open another position because you will need at least $110 at 30:1 leverage to open two positions.
The lesser the leverage ratio, the higher the required margin or margin deposit to open a position.
You will need a bigger leverage ratio to open two positions with $70 and not exceeding 30 pips stoploss at 0.01 lot size. Leverage ratio of 50:1 or 100:1 should suffice.
Leverage of 5:1 will require larger equity to trade. You would need $300 to open a micro lot position of 0.01.
At 1:1, you need $1500 to open a position of one micro lot.
Hope that helps
I don’t think leverage size really matters.
If you using proper risk management you will be working out where your stop loss needs to be and then you’ll be working out your risk to stop loss and be opening a position size based on your risk. So if you have a $70 account and you risk 1% per trade, then your loss if you hit stop loss is $0.7. Doesn’t matter what your leverage is as you’ll only ever be risking $0.7.
If leverage isn’t important why is he unable to open two active positions?
$7 is 10% not 1%
Good point! I’m not used to such small accounts so my mind generally thinks in full dollars and i had only just woke up! Well, that’s my excuse anyway.
But yes $7 is defiantly 10%, and $0.7 is 1%.
Not being able to open positions would normally be due to margin rather then leverage.
I’m sure someone a lot smarter than me will be able to give you a better answer. I was just pointing out the leverage isn’t very important when your using risk management.
Margin requirement is determined using the leverage allowable by that broker.
Without leverage you cannot determine your margin deposit to open a position.
This is automatically done with every broker but it helps to know what you are doing and why you should or not be doing something.
For example, you have $400 and wish to open a mini account where 1 pip = $1
The maximum leverage allowed by the broker is 20:1
You trade EURUSD and see a buy opportunity at 1.5246.
You want to risk 30 pips for the trade which is 6% of your account.
Already, you would have $470 as balance after trade is executed. But that is not all. The broker needs a good faith deposit to maintain the position.
Your margin requirement is 5% (1/20 × 100)
Your required margin is $762.3 (5/100 × 10000 × 1.5246).
The trade will not be executed. The platform will return an “insufficient balance” error. This is because you are unable to meet the margin requirement.
If the leverage is, say, 100:1
Margin requirement will be 1%
Required margin is now $152.46
The trade will be executed but your usable margin is $397.54, not $470.
If the trade results in a loss, your new balance is $470 - spread
This is how leverage plays a vital role in money management
With position sizing, you want to scale down your lot size to allow greater room for stoploss with the same risk.
You want your stoploss to be 70 pips risking $50.
$50/70 = $0.7
¢70 per pip
To open a position, where your leverage is 20:1, your margin requirement is 5% but your new required margin is $76.23. That means you are able to open a position but your gains and losses will mostly be lesser.
No matter how you look at it, the knowledge of leverage ratio is extremely important if you really want to account for every cent or dollar invested.
I’m glad we cleared that up.
There are many brokers that offer 1:5 leverage or even lower. It’s wondering for me to hear that you can’t find it in Australia, because the financial supervisors are pretty rigid here and so their rules imposed on brokers are strict, too.
Trading with 1:30 is quite dangerous, especially if you aren’t as skillful as it’s required to trade with more than 1:10 leverage.
Approach leverage with caution, they can play a bad joke with you…
The fact that you can’t utilize bigger leverage than 1:30 is quite interesting.
No, I ain’t mean any mocks or something, vice versa, I believe that you are a wise trader who realize the risks which come with applying big leverage.
There are tons of brokers which allow to trade with a small leverage, you can find a platform where you can adjust leverage size on your own. If you are from Australia, then rules are strict enough, thus brokers try to restrict the leverage.
Surely, 1:30 is a good leverage ratio, even if you don’t trade small volumes, it makes sense to use it, because when you open a position margin isn’t eaten too fast.
At the same time it depends on the proficiency level so to speak, some traders who lack experience believe that leverage higher than 10x is damageous. Maybe it is, but if you are fully convinced of the analysis results, then there’s no sense to be afraid of getting stop out or magin call.
50 balance with 30:1 leverage gives max amount of 1500 USD, i.e. 0.015 lot size. You should fund your account more or simply increase leverage or change broker where its available.
Thanks everyone for your input, I have increased my balance which seems to be working…
Cheers !
Bob
The only issue is the lack of margin; you need to either increase your balance or increase your leverage.
Thanks Emi, I realise you trade better with more $$$$$ in the bank…
Cheers,
Bob