I would use leverage as high as my system allows it. Currently the ideal level for me is 1:100. Why ? Read on.
In each trade, my max loss is 1%. If I have 100k account, its 1k.
My stop loss is never greater than 100 pip for GBP/USD.
Let's say the stop loss is 50 pips.
The max position size that I can purchase is 1000/50/0.0001 = 200,000
With leverage 1:100, broker will lock USD2k from my account. If the trade fail, USD1k will be deducted from my account.
What happens if the stop loss is 150 pips.
The max position size that I can purchase is 1000/150/0.0001 = 66,666
Broker will keep USD 666 from my account
What will happen now ? Chances are the stop loss will never reach 150 pips, position will be closed by broker immediately when the position's value decrease by USD 666. I exitted wayyyy too early. That's bad.
Higher/lower leverage doesnt matter. It's the MM that one need to watch.
In each trade, my max loss is 1%. If I have 100k account, its 1k.
My stop loss is never greater than 100 pip for GBP/USD.
Let's say the stop loss is 50 pips.
The max position size that I can purchase is 1000/50/0.0001 = 200,000
With leverage 1:100, broker will lock USD2k from my account. If the trade fail, USD1k will be deducted from my account.
What happens if the stop loss is 150 pips.
The max position size that I can purchase is 1000/150/0.0001 = 66,666
Broker will keep USD 666 from my account
What will happen now ? Chances are the stop loss will never reach 150 pips, position will be closed by broker immediately when the position's value decrease by USD 666. I exitted wayyyy too early. That's bad.
Higher/lower leverage doesnt matter. It's the MM that one need to watch.