Lowering the cost of trading?

Are there some specific steps that traders can take to lower the costs associated with trading [especially reducing the amount of margin that is required in your account]I`m a newbie starting from scratch, and I need to manage the very limited capital resources that I have to work with. Do I need to use less leverage,
To reduce my margin?

It would help to know what leverage you’re using. But try reducing your position size and keep it small.

Thanks jafooly for your guidance on this

Right now I`m only trading in a demo account so I don’t know what is the amount of leverage I am trying to think strategically (i.e., and lower my cost of trading similar to what some some Options traders achieve with net Credit Spreads Is there a specific type of trade in Fx that the Fx broker will consider less risky and give the client a break on margin?

Considering you’re a beginner, I would say yes, you should use less leverage as high leverage is directly proportional to high risk. And that’s something I won’t recommend for beginners.

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This is not actually true.

Leverage is nothing more than a ratio determining how much of your equity balance is allocated against your open position.

If you open a position of, say, 1 lot with a leverage of 30% and i open a position of 1 lot with leverage of 400% then our risk exposure is identical. The only difference is that much less of my capital is locked up against the position.

High leverage is only very risky because it allows the trader to open bigger positions with the same amount of capital in the account.

So it is the position size that defines one’s risk exposure not the % leverage. Leverage is a problem only when it is abused in order to create overexposure via excessive position size


Sage advice. Risk can be measured in many ways. For me, risk to capital is the most important and using high leverage presents a higher risk to capital. A trader’s primary concern should be preservation of capital.

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This is true. Position size is what matters. I love having access to large amounts of leverage as like you said less of your capital is locked up.

A starter position for a trade of mine can sometimes be less than my account balance. The problem that I have found with most newbies though is they don’t see leverage in this way or use it properly.

They want to open a 250,000 unit position with a 500 unit account and don’t view leverage as the tool that it is that could allow them to have multiple trades on for small amounts I.E 5 500 unit positions open. This seems small to them even though they are now controlling near 5X the capital in their account and that is actually a lot, especially for a new trader.

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Check with your broker how much leverage you re using

Choose your brokers wisely, go for the ones charging less fee. Also, be wise while making decisions on leverage and such options.

Please help me understand this: if I have a swap-free account, should we assume that the commission or spread they charge is basically for the service they offer or it’s their commission profit from the leverage they grant?

See you have to understand that commissions and overnight financing fees are the chief source of income for the brokers since both are related to the position size. It’s really important here for an amateur trader or I would say a new trader to select a broker wisely because brokers indirectly make money from leverage since it gives an opportunity to trade for a bigger lot size.

Thanks for explaining in detail and this put things in perspective about how to move forward. End of the day even if I have to settle on low transactions for a more reliable broker, it would be worth the deal.

Yes, if supposedly you choose a broker who gives you leverage of say 10:1, the trader who’s on the market at $100, the broker can control as much as $1000. It definitely seems like a high-risk high-reward proposition, but this eventually means that the value of each pip is higher than what it was anticipated and the broker ended up earning much more money. You do have to realize that more leverage doesn’t mean a better broker. For a new trader, I would strongly suggest to go for a maximum leverage of 10:1 or to be on a safer side, 1:1 and select a broker who offers this option. There are many friends of mine who started with fxview and FXTM and were happy with the trade.

I don’t think there is anything like the best leverage to be used. You must make your trading decisions on the basis of what you know and can afford. Some people are making great profits with leverage while at the same time, there are many traders who are losing badly. It is up to your understanding and skills that can help you choose the right leverage.

Forex trading can get you a lot of profits for sure. But it shouldn’t come at the cost of everything else. I personally believe that you should never risk the money that you would need in the coming 5 years. This way, you will have enough money to trade with and for your expenses.