How Do You Decide the Right Leverage for Your Trades?

Trading Discussion
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Hey everyone

Quick question for you experienced traders: How do you decide what leverage you would use in your trades? :thinking:

I understand higher leverage-level means higher gains and losses, but I would like to know what you generally do in your real-money accounts. I mean, do you stick with some fixed ratio for using leverage or do you go on a case-to-case basis depending on the setup? Or maybe you never use leverage at all?

Hoping to hear from you! Would appreciate it if you could share your experiences or tips! :pray::blush:

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Higher leverage means the broker isn’t properly regulated.

the limit is 1:50 in the US, and 1:30 in the UK, European Union and Australia (those are the proper regulators).

The fact that you have 1:30 (or even 1:50) leverage available on your account doesn’t mean that you have to use it, for all trades.

It’s only really an issue for people with a “gambling approach” to trading. And they’re not profitable traders anyway. To anyone else, this is honestly barely an issue at all.

Unfortunately the world’s full of people who wrongly imagine that “lack of higher leverage” is the main thing stopping them from trading profitably, and it’s also - even more unfortunately - full of brokers who chose to avoid proper regulation so their customers aren’t protected, and do so under the pretense of “being able to offer our customers higher leverage that way.” (Brokers to avoid, obviously!).

These very recent posts (and hundreds of others) explain the point.

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Hi @mykyta45,

Leverge is used when you want to optimize your strategy. Bigger leverage you can open bigger volume.

Example: Your balance is 1000. Using 1:100, you can open hypothetically 1000 x 100 = 1 lot. When you have 1:50 it will be 1000 x 50 - 0.5 Lot.

So higher your leverage, bigger volume you can trade. Bigger volume means bigger profit or loss.

When you are still trading 0.01 lot, as beginner, Leverage won’t be useful for you.
Leverage is useful when you already have good strategy and base on your strategy, you have developed a good trading plan, completely with risk and money management.

Once you know exactly your risk management, leverage will be useful.
Example having 1000 USD. You want to earn 20% profit.
Let say your strategy will give you profit 2 USD each position / 0.01 lot.
Having levarage 1:50 you will allowed to open up to 0.5 lot. So your max profit will be 50.
Let say each month you can only trade 2 times, your maximum profit will be 100, which is 10%. If you are really confident with your skill, you can request higher leverage for example 1:100. So you will be allowed to open max 1 lot. Using 1 lot you can have 100 / opportunity, in a month you can have 20%.

So, the leverage will boost your performance by using the same amount of money.
But thing is not this simple. Bigger leverage will also dangerous. By using 1:50, your draw down will also limited by max trading volume, You will be farther away from margin call and stopped out level. It’s kind of protection for you.

When you want to use bigger leverage, you have to calculate properly volume, risk and target profit. If you are still beginner, use 0.01, leverage is nothing to be concerned.
Even when you are given 1:200000, it doesn’t effect you. Just be sober when open a position :smiley:

Above explanation is just illustration. 1000 with 1:50 wont be enough to open 0.5 lot. There are margin for opening position, margin to maintain position. So by having 1000 and 1:50, realistically can open open around 0.2 lot.
I usually need 1:200 to trade aggressively on a well regulated broker. But you need to go through some questioners to have it available. Using offshore broker, you can also have bigger leverage. Some can offer you 1: unlimited. Basically you can earn 100% or die miserably at once :smiley: Not a healthy approach.

Offshore broker isn’t always bad. They just have legality to let their clients to be exposed to higher risk in financial activity. This is the truth behind offshore broker.

Good Regulation doesn’t always mean the broker is good or safe.

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But lack of good regulation means it almost definitely isn’t.

Even a total noob like me knows this much.

Brokers choose whether or not to be regulated, and who by.

It’s dead simple, really: it’s just about “getting the odds on your side rather than against you”. Just like trading. :grin:

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Hi @Dockdaisy,

You got me wrong here. Pay attention to my statement carefully.

I said Good Regulation doesn’t always mean the broker is good or safe.
It doesn’t mean Broker with lack of good regulation can be better

Can you understand this sentences ? Or, I’m a noob can’t understand this sentence. :rofl:

You have to know how regulator work to a broker. In which case regulator can be rely on. I don’t wont to argue more.
There are good regulated broker but they are less safe compare to others regulated one. In short is their management and how to operate. This is what I mean.

Please visit a few broker to understand more … this is the way to have the fact …
Here is reference to understand how regulator work in detail. You will understand their scope of work. More about offshore broker, I suggest you to visit a broker and ask them personally. Don’t just use assumption … we need proof and fact :slight_smile:

https://asic.gov.au/regulatory-resources/find-a-document/regulatory-guides/

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Hi @KrisValtysdottir,

I’m patronizing ? That’s fine … I will comment no more …
I only answer question, I don’t want to fight …
I have explain what I have to …

Hi Ms. @Penelopip and Mr. @Pipstradamus …

I hope you both can help me to delete my account. It’s time for me to leave BabyPips for good.
Thanks for all your kindness, but nothing is forever. After so many incidents, I finally understand, my existence here isn’t good for BP ecosystem.

Thanks again @Penelopip , @Pipstradamus and @Jess … I will miss all of you.
I wish BP will always be the best and helping all traders.

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That’s NOT good news. :roll_eyes:

I hope you change your mind.

Obviously not by intention, no. But you really did sound like it, there. It’s better to say “Sorry, I didn’t mean to sound patronizing” than “Delete my account”. Just my suggestion.

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Risk tolerance, also it’s specific for the market you’re trading. My leverage is different when I trade ES or NQ.

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Interesting. But I think maybe I can understand? You’re doing that because the Nasdaq is so much more volatile than the S&P?

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Yeah, correct. The best thing is to ‘feel’ the market - If you’re new you need time in front of the charts. Focus on 1 or 2 markets at first. When I started in 2016 I was following 10-15 pairs, that was a huge mistake haha

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In my opinion, the higher the leverage, the better, because it requires less margin and gives you more free margin to manage your trades.

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If we can stick to safe trade with the smallest lot size, high leverage may be useful, but high leverage could lead traders to be greedy; this isn’t good.

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I don’t.

I never think about it at all.

It’s relevant only to three groups of people -

  1. Those who overtrade, using multiple simultaneous positions that could burn their whole account when they all go wrong together through being correlated;

  2. Those who don’t quite appreciate why every genuine, honest, independent regulator in the world is obliged by law to limit the leverage that the brokers they regulate are allowed to offer customers (max. 1:50 USA, 1:30 anywhere else);

  3. Those whose trading habits predicate a need to be concerned about leverage, also typically (not always) those who imagine that not having high leverage available will reduce their chances of switching from being a losing trader to a winning one - the exact opposite’s usually true, but you can’t tell them that and expect them to be willing to listen or to learn, because they’d rather be right than be educated.

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You say “only” but actually you’ve probably described the great majority of people arriving in the forex trading world and opening their first accounts, there (especially the middle one of your three “groups”)?! :open_mouth:

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I’m really glad to see someone say this! I’ve been looking at the thread’s title, since it appeared yesterday, and thinking “What’s this about? I’ve never had to ‘choose’ leverage for a trade?!” I wondered what I was missing out on. :blush:

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I haven’t been online for a couple of days, but if I had, I’d have been thinking exactly the same thing! :upside_down_face:

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Yeah, I assumed we were talking about the size of the trade. I never had to directly pick a specific lev for a specific trade.

What I do, I simply pick a number of contracts :smiley:

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Choosing the right leverage depends on your trading style and how much risk you’re comfortable with. If you’re just starting out or trading small accounts, it’s safer to use low leverage—like 1:10 or 1:20—so you can manage your risk better. If you’re more experienced and have a solid strategy, you might go higher, but only if you’re confident with strict risk control. Always think in terms of how much you’re willing to lose on a single trade, not how much you could gain. Leverage gives more power, but it also means more responsibility.