Hello everyone Im new to Forex in terms of live trading and have a question regarding leverage and money management. I hear all the time that using a high amount of leverage is no good and will eat away at an account. But how is using less leverage different from using high leverage with common sense and discretion? What is the difference between trading 1 mini lot (10K), using 400:1 leverage with a $1000 dollar deposit…and trading the same contract size using 50:1 leverage. As far as I can see, I would have to use less margin to hold such a position which means it would take the market to move more pips against me before I got a margin call. As opposed to using LESS LEVERAGE where I have a greater margin to post upfront to hold open a trade of the same size and have less room for the market to move against me in terms of pips before I would get a margin call. Can someone please expand on that for me, it would be greatly appreciated.

Well pretty much the only thing leverage does it allow you to trade more lots with less cash so for instance 200:1 leverage lets you trade with $50 per 10K on a mini, 400:1 is $25 per 10K on a mini and so on. pretty much if you have 400:1 leverage and 50:1 leverage but trade the same amount of lots there is no difference. Having high leverage is not dangerous but the way you use it is. as long as you have proper money management you could have huge leverage and it wouldn’t affect your trading. Most people just risk more with the higher leverage, but if you don’t do that, then ur fine.

One other thing to take into account with whatever leverage setting you use, is the cost of carry. With most retail brokers, the higher the leverage, the more they charge on negative carry positions and the less they pay on positive carry positions…and vice versa.

This is only a concern if you hold positions for longer than a day…


could you please elaborate on that? how is it that high lev isn’t dangerous?
your loss rate increases real fast the more open lots you have.

and what is your def of $ mgmt?

Wow this forum moves quick, lovely to see replies to my question in the same day. Thanks you for those that responded. I may be new to trading but defintely not new to money management. Id never risk more than 3% of my total account…EVER. I just wanted to make sure there wasnt some hidden monster in using higher leverage other than abuse of it. Interesting that less carry over interest is paid using more leverage. I know the pip spread is affected directly by the size of the lot traded. Does leverage also affect the cost of pip spread?