Is low Leverage good

Good day,

I was wondering about the fact that all over the internet there is a big hype about not using high Leverage. Especially if you are a beginner. I decided to only use 1:10 leverage on my back testing software. That caused a insufficient funds pop up when I tried opening a second trade. “Not enough Margin available”.

What I then did was move my Leverage to 1:100 and had no problem opening another trade. Long story short I started playing around with the leverage and found that it did not matter if my Leverage was 1:5 or 1:300 I still just lost 1% of my balance when my Stop-Loss got hit, using 1% risk of my account balance.

On the contrary I had way way more Free Margin at 1:300 Leverage than 1:5 Leverage.
The Margin Required for the open a trade position was also way less on the larger Leverage.
So more Leverage is way better that what is been said on hundreds of Forex websites to keep your leverage low or it will ruin you and blow your account.

Just want to ask if this is right what I found to be the case or am I missing something and my Software I am using is faulty.

Thanks for the responses in advance.

I think 1:50 is the best option for the new traders.

Thanks for the reply HunterSolander.

For those other beginners who is not sure about leverage and the effect it has on your trading. I kept searching and digging for an answer and this is what I came up with.

Found one website that basically explained that the danger of leverage is over exaggerated and that using a Stop-Loss has now effect can eliminate any danger that high leverage posse.
Then decided to contact my Broker and this was confirmed. It (Leverage) is only a risk for those who trade without a Stop-Loss.
He also explained that just about every article and person on the internet that speaks about leverage and the danger of using high leverage, will not use the words “unless you use a Stop-Loss.”
This is because the warning is for the risk takers that trade without a Stop-Loss.
Hope this helps someone,
Cheers.

This is not true, you can have slippage, and if you have a position from one day to another you can have a market gap.

High leverage gives you more margin in your acount wich means you can open bigger positions, bigger positions equals more risk.
You can have high leverage and trade with small positions, but if one day you decide to do something stupid you will pay the price.
And most people like to try stupid things and they pay the price, thats why most people say that high leverage is bad.

HiTP89,

You are absolutely correct about slippage and market gap. These however are the rare occasions and from my understanding the slippage is News related which should be avoided.
This is what I have been looking for when I researched the Leverage thing and basic got the same reply you gave me. Things like “bigger positions equals more risk.” That’s it no explanation why. My question is. If I use a 1% stop-loss of my Account balance. which will be $10 of a $1000 account balance, and it gets hit will I lose more than 1%($10) regardless of what my Leverage is. If you say yes I will lose more, please explain why and how a bigger leverage affects or changes that $10 Risk I am taking.

I hope my question is clear now, not sure how to explain or ask this in a simpler way.

Thanks

Lets say you open a trade with 1:10 leverage you set your stop loss to 1%, and you now dont have any margin left so you cant open another trade.
You change your leverage now to 1:300, now you have free margin, but if you only want to risk 1% you dont need more free margin because the margin that you had with 1:10 leverage already alowed you to open a trade and risk 1%.
You would only need more margin if you wanted to open another order, and if you opened another order you would risk more, you could reduce the stop loss or move it to breakeven and open another trade and maintain the risk of 1%, but in order to do that you could change the leverage just a litle up lets say to 1:30…
In the end if you are able to maintain risk to 1% having low leverage or high leverage wont make any diferrence, if you have 1:1000 leverage and only risk 1%, you will have a lot of free margin , but you dont need the free margin

Yes in my opinion, low leverage is good. Leverage is a doube edge sword, the lesser the better.

Low leverage is good for beginners and traders that want to trade with low capital. Lower leverages have minimum risk involved so that the trader can recover from losses and avoid blowing their accounts.