DislikedBy PFXGlobal, Today 4:59am, Topic Market Insights The dangers of leverage in the forex
After years of working in the forex as a trader and a service provider; I have been able to see some common denominators amongst traders who struggle. In my experience, there are really very few things that stop a trader from being successful but they are catastrophic if they aren't dealt with. The most dangerous of these things is the abuse of leverage.
In the forex, traders rarely understand what margin and leverage mean and how dangerous excess leverage can be. Margin is the required amount of equity to hold an open position. Leverage is the ratio of margin to the open position's value. Therefore, if your margin requirement is $2,000 for a full forex lot ($100,000) of value then you have leverage of 50:1. There are many benefits for keeping margin rates low. From a practical perspective, it is the equivalent of trading suicide to max out your account margin anyway. Keeping it high carries interest or roll-over disadvantages and can lead to using too much leverage. The final danger of excess leverage is that it can take a good idea or system and ruin its chances for success by making it impossible to sustain the draw-downs.
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Analysis by Profiting With Forex (PFX)
Is this gonna help you lemepug? Just trying to help