Higher leverage can make trading LESS risky
You have seen disclosures like this:
"Trading foreign exchange on margin carries a HIGH LEVEL OF RISK, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose! The high degree of leverage associated with trading currencies means that the degree of risk compared to other financial products is higher. Leverage (or margin trading) may work against you resulting in substantial loss."
But high leverage does not equal more risk. In fact, for the smart trader it equals less. How?
You don't need to deposit all of your trading capital with your forex dealer. A trader with $1000 to trade can deposit $900 in an FDIC insured account at a local bank (in the U.S.) and put a mere $100 on deposit with a forex dealer that allows small deposits and offers high leverage. Then they can put on trades as large as $5000 with 50:1 leverage and take on an actual leverage against their total trading bank of 5:1.
"But wait!! You can lose your whole deposit and owe more!!!" - says someone out there.
The fact is that in those big crash times (such as the Jan 15, 2015 SNB announcement) many dealers offered negative balance forgiveness to those traders whose accounts were driven into the negative. How did they do this? They are the market makers who won the losses incurred on those accounts. They did not actually take on the losses forgiven by "negative balance forgiveness". No you cannot always count on this but it is easier to negotiate for it with your money in your local account than on deposit with the dealer.
Anyone else using leverage to decrease their third party forex dealer risk?
i'm doing this on regular basis, using this tool:
i used to sell the tool on mql market years ago... if there's interest i can post it here for free
High leverage would not do any harm for any trader, high lot does the harm.
i always see high leverage as my friend, i don't understand how other trader see leverage as some bad tool
how they got to that conclusion is beyond my understanding
i will post sources too, as i really can't provide any support due to time constraints.
to the topic: i have always been an advocate of keeping just necessary balance on a trading account.
clearly, all the 'professional' traders tell you must have a bulk of $$$ to be able to trade seriously, and risk only a very small percentage per trade... frequently they say your drawdown must not reach 20-25%, and if it does, you are supposed to stop trading and replenish the account... i'm always asking: ..then why the f*** are the 75-80% of money even there? ...no one gave me an answer i could reasonably understand....
however, i do support the trade only with money you can afford to lose principle strongly - one more reason to not keep your entire trading capital in your trading account... another reason being some 2015-SNB-like disaster situations where stops don't get honored and you lose the nonsensical 80% 'cushion' in a blink of an eye.
I will wait to test that tool. Will be following.
The trading you have shown in that vid is whole another level thing. & You do that on a regular basis! 100$-256k if i saw it correctly outstanding i shall say.
having said that, i made about $2200 from $28 (real) running a much more (visually) primitive version of this tool back in late august 2015 during the eur/usd heyday, within 2 hours or so... then a friend of mine bombed me i should make the tool commercial... so we did it. heh i remember i have used android kitkat design templates for the buttons so it looks appealing.... yes i was selling the thing for $77 in the mql market, some dozens sold but later i didn't have time for replying & solving issues of users who didn't even know how to install an ea.... so it's been dropped from the market.... it's the only one piece of code i ever sold commercially.... i will publish it perhaps tomorrow as i will find time.
i'm just a hobbyist, trading (or should i say:gambling) small... i'm using it still, from time to time, if (me thinks) an opportunity arrives.
last week i upped 250€ to 900€, 3.3K next week target (if met, i'll probably withdraw most... but can bust really well too lol)
recently trading usd/jpy only, easiest to read imo
30% daily target
can post stats if anyone wants
1:30 is enough if I use no sl, u can open a position with little margin on certain pairs. my problem is the fukking 50% stop out level which means I need to double the deposit.
if I trade intraday using stop losses, (eg. I open 1 trade per week), then I would use 1:7 max. all this according to RoMaD.
wow 28 to 2200 quite a lot! You just need the right market condition to keep adding position. I once made 1k to 133k in demo contest & won in another contest i made 10k to 850K something all in demo contests but won real money for that.
Sure, post it whenever you feel free. The tool design is amazing i would say Lol, yes these sort of approaches might hit the jackpot or bust, but as long it is within the affordable loss limit thats fine. Add your TE, if not a problem, easy to track there.
As you point to high % gain...
does anyone of you know Samuel Leach (Samuel and co. Trading).
This guy has verified myfxbook stats with thousands of %.
Can anyone tell me if this is real/fake?!
what if you anticipate the direction of a swing trade? Can you use it ?
a tool is just a tool, it depends on how it is used.
closed a trade just few minutes ago. as i mentioned, i'm only playing with usd/jpy recently. the pair should be ripe for a correction, if not reversal... after the last week's hype around us-china there's momentally little reason to continue the rally, yes they can run it back to 109 perhaps a bit higher, but there's quite a chance it won't be tonight, that would need some catalyst and that is simply not there.... the open was lower and the b!tch went long immediately, so i looked for a short.
here's a technical reason:
i didn't auto add in this case (like i did on friday on the way up) because this one was much riskier:
i'm using stops, but not preset. price has to make a positive step away from my entry:
when the down leg started to look good, i adjusted the target higher to meet my goal, so i can forget about charts for the rest of the day as quickly as possible...
but heh, i was too late with the screenshot, the bastard was quicker than me see ya tomorrow, yen!
title is not correct
© Forex Factory