Leverage!!

take a loan from a bank and play forex...

i've thought of this many times so taht i can trade for a living sooner.if only there was an interest free loan

Tempting, but I think it is not such a good idea.It is hard enought if U lose your own money.
I have opened live account 3 years ago...amount was 300$ and I lost them in 2 month. In that fase of my trading I would have lost even 300000$ if I had deposited it becouse my trading strategy was catastrophically bad.
If U are good trader someday U will trade for a living even if you start 300$, 2500$ or 100000$.....Use your knowledge not your money....

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PLAN YOUR TRADE AND TRADE YOUR PLAN

ask a japanesse friend to loan in Japan, transfer it to you, you transfer monthly to pay that poor jap friend.
i guess it is 0.8% a month?
for safety sake, not to loan more than 2x your own equity, so the payment is easier.
not free, but still tempting...

here is another way: seek somebody to invest to you, say ,"i can profit 3% a month", & take the rest of the profit to yourself. (it is the same that you seek somebody to loan you money for 3% a month but said in better word).
mind that since investor seek a stable income, better prepare next month profit in advance.

tempted by that loan thing again....

if i loan from bank for 12% a year =1% a month = about 0.05% a day ....
if i can have free / unused money / saving per month as big as (about) 1/12 of that loan...

basically i start 1 year early with 12% drawdown...
the handicap somehow acceptable, should i bankcrupt, it is like having car loan but the car crashed mid way.....

(how big is 0.05%?)
in $ 1000, it would be = $0.50
if i buy 1 micro lot ($0.1 a pip ) it is = 5 pips (almost as big as spread)

i have a 100 000 to trade with

Im given a choice to use 50:1 (2%) and 400:1 (0.25%)
Lets say i wanna trade EURUSD at 1.3000 with 1STD lot

For 50:1 Account
Price x Lot x Leverage = Amount
1.3000 x 100000 x 2% = US$ 2600

For 400:1 Account
1.3000 x 100000 x 0.25% = US$ 325

So in essence, you HAVE TONS OF MORE TO TRADE WITH 400:1 AND THIS IS THE EVIL OF TRADING.

Broker leverage should never be taken into consideration when trading execpt for maintenance margin.

Its easier to size your positions by using True leverage.
Say,
Equity = 100000
RISK per trade = 2%
SL = 50pips
Lot Type = STD (100000) where 1 pip us US$10

50 pip SL = Loss of $500
2% of 100000 = 2000
Position Size = 2000 / 500 = 4lots for 50 pip SL trade
True Leverage = 4:1
Most of the time with MM true leverage seldom goes over 10:1 and it simple means you need not get urself a 400:1 account

Now lets compute how much you need to place for a 4lot trade with margin maintenance of 75%

Say u trade EURUSD
50:1
1.3000 x 400000 x 2% = US$ 10400
Maintenance will be US$ 7800
Max loss = 2000k (no margin call)

400:1
1.300 x 400000 x 0.25% = US$ 1300
Maintenance will be mere $975

So what do we use all these for? Really nothing....hahah. What you should use it for is simply if that broker offers u 400:1 just put 10k and keep the 90k but trade the account like a 100k account coz you will be less likely to hit a margin call unless you take on more than 4 losing positions at one go, returns are likely shown to be magnified on paper!

You can get very cheap loans in many countries by using 0% credit cards. You need to be very experienced and be sure you know what you are doing though if you borrow money to trade! Certainly a very bad idea for newbies!

Not really.

Trader B will simply trade smaller lot size than trader A. Both should risk the same equity % per trade and thus they both play in equal fields money management-wise.

L = S/E

L - leverage (or gearing); max level usually 50, 100, 200, 400
S - the sum in dollars of all your open positions
E - equity

Max Leverage determines Margin Call.

Max Leverage always determines max position one could open.

If one openes position with leverage of 400:1, he has a good chance to loose all his account in 2 seconds and 25 pips only (for GBP, EUR, NZD, AUD)

EURGBP gives him chance to loose all the account in 13 pips (with leverage 400). It does not matter how much was your account. All the account could be lost in 0.1 0f second and 13 pips of EURGBP

I say more leverage the better just in case you need it. I have 200:1 leverage but wouldn't make a difference at all whether they give me 100:1 or 400:1, I don't trade differently. But having 400:1 would be better since I can put more money in when I'm sure it's going my way. (But then again how sure can I EVER be?)

I would agree with you in most cases, but my broker, FXSol, has more favorable cost of carry rates for lower leverage. I have mine set at 50:1 to take advantage of this.

andersenws