Give deeper thought to what you're saying here. You've compared using as corollary to a more traditional business taking on a line of credit. Then you indicate that someone who takes on that line of credit should actually use all of it. I don't know how much of the available credit limit one "should" use in order to not be considered "a bit crazy" but let's just say that it's somehow agreeded in general circles that it's 50%.
I think you miss-understood my example. I never said that someone that one that takes a line of credit should use it all.. I implied the contrary. And I placed it in relations to someone income.
Example: if you have a positive expectancy system that calls for the use of 200:1 leverage and you can only get a broker that has 100:1...then if you cut the positions sizing down by 1/2 the system will still make money...but it won't take just a 50% hit....it will take a much LARGER hit than 50% because of the compounding effect (assuming you increase position size as the account balance grows). It gets a lot worse if the system calls for a 200:1 leverage and you can only get 50:1. A LOT worse.
Other then some basket trading, Arbitrage or some grid trading, it is hard to imagine any good and sensible strategy that would need such big availability of credit of more then 200 to 1 . But yes.. 50:1 is way to little for USA traders and forbids the use of some good systems.
Again...fear of leverage is irrational. As long as your system is profitable you should use whatever leverage the system calls for.
You are correct. Should be no fear to have the most possible available.
But the use should be wisely.
J.
I think you miss-understood my example. I never said that someone that one that takes a line of credit should use it all.. I implied the contrary. And I placed it in relations to someone income.
Example: if you have a positive expectancy system that calls for the use of 200:1 leverage and you can only get a broker that has 100:1...then if you cut the positions sizing down by 1/2 the system will still make money...but it won't take just a 50% hit....it will take a much LARGER hit than 50% because of the compounding effect (assuming you increase position size as the account balance grows). It gets a lot worse if the system calls for a 200:1 leverage and you can only get 50:1. A LOT worse.
Other then some basket trading, Arbitrage or some grid trading, it is hard to imagine any good and sensible strategy that would need such big availability of credit of more then 200 to 1 . But yes.. 50:1 is way to little for USA traders and forbids the use of some good systems.
Again...fear of leverage is irrational. As long as your system is profitable you should use whatever leverage the system calls for.
You are correct. Should be no fear to have the most possible available.
But the use should be wisely.
J.