Leverage configuration and blocked money

Hi, I think what I’m going to say is right but please feel free to correct me if I’m wrong. My thread is your thread so we can have an open discussion.

This is my demo situation, which is quite close to what I’ll have if someday I open a live account:

[li]10K USD.
[/li][li]10:1 leverage.
[/li][li]Trading multiple pairs.
[/li][li]Risk per trade between 1% and 2%, depending on the setup, that means that I’m willing to risk per trade between 100$ and 200$ the placing stop loss where it makes sense.
[/li][li]Each time I open a trade I use approximately the same number of units than USD I have in my account balance, at the moment 10000 units.

Because I trade multiple pairs I can have several trades at the same time running. I’m going to put an example using round numbers.

Lets say I’m trading a pair with currencies that are quite even, 1:1. I open a trade with 10000 units, so each pip movement is $1, and following my risk rules I’ll close the trade if it goes between 100-200 pips against me, which is $100-$200.

Because I use 10:1 leverage to buy 10000 units I just have to invest $1000, and I’ll stand movements against me of $100-$200. What we see here is that I’m blocking the remaining money. [U]Between $800 and $900 will be blocked[/U] with no use at all. That is 8-9% of my balance

Having $10K and 10:1 leverage means that [U]I can only have 10 trades open at most[/U]. If suddenly I find another nice setup I won’t be able to trade it as I don’t have any free margin.


Changing a leverage that is still according to mi risk levels. For instance with 20:1 I can still open a trade with 10000 units while I’m only investing $500 of my money. More than enough for my 1-2% risk range.

In fact with the round numbers of this example I still could use 30:1 leverage. For each 10000 trade I would only invest $300. I could cover my risk range and I would only block unnecessarily $100-$200 of my balance (1-2%).


Leverage doesn’t affect the amount of units you buy. It affects the amount of money that you have to put to back your trade and it should be according to one’s risk management.

I think [U]I should change my leverage from 10:1 to 20:1[/U], which is more than enough. I don’t need 30:1 but even if I use 30:1 it won’t affect my strategy in most of the cases, but if someday let’s say EUR/USD is at 1.55 I’m screwed as my risk range is bigger than the amount invested.

What do you think? :slight_smile:

A superb understanding of leverage & how it can effect your ability to place a trade.

However your money management should include a total amount of risk, as well as
the amount of risk per trade, 1 - 2% per trade is good, also we must add 5% total
in all trades.

In your early days try to not have too many “balls” in the air at one time, this is
when newbies lose track of their trades. Get a winning system first, test it in demo
& with real money, make it profitable.

This is allied with find a pair to trade & make it your own, then move on.

Thanks for your reply daydreamer65! I can’t pronounce myself yet about the total risk at any given moment. I have to consider that but following my trading plan I can have multiple trades running at the same time. For instance at this moment I have 3 and last Friday they were 4.

I’m monitoring 18 pairs and my goal is to increase it to 28. I use the daily and weekly charts so I have time everyday to run through all the charts. This is an approach I found here:


This is like multitasking. Each pair runs in isolation. Years ago I played online poker and at my best performance level I used to play 12 tables at the same time. Lasting a hand about 1 minute that means I had to take a decision each 5 seconds on average, and each table run in isolation, no relation with the others.

So with 18 pairs and a maximum of 2% of risk per trade I could have a maximum of 36% of my total balance at risk. Sounds crazy, but each trade is independent from each other. However the chances of having the 18 pairs “open” at the same time is ridiculously small :smiley:

That is my trading plan. Still tweaking it, still considering modifications, but that is the core :slight_smile:

+1 Nice job :60:

Thanks mate! I just wanted to be sure that I’m right before changing my leverage.