about leverages

Guys I want to find out how much leverage is optimal for 5000 and for 20 000 account. Currently I have two accounts, with 5000 I run 200:1 leverage but I can trade mini-lots, on 20000 account I run 100:1 and only standard lots.
I have heard that some recommends 50:1 leverage. I have noticed that Diallist is not good with high leverage.

any comments?

fx-trader777

For long term trades i personally like to use 50-1 leverage because of intrest. If you are not a long term trader this would not interest you. A high leverage could also be risky in fear of a margin call.

Leverage must be one of the most misunderstood aspects of FX trading! The leverage that you have in your account is largely irrelevant. It is the risk that you take in the trade and the % of your capital that you are willing to lose.

If you have a $5,000 account, how much are you willing to lose in each trade? 1%, 2%, 5%?

Lets assume 2% or $200.

The next thing is what is your typical stop loss size? 10 pips, 20 pips, 50 pips?

Lets assume 20 pips.

This means that you would trade:

$200/0.0020 = $100,000.

As long as the leverage on your account is better than 20:1 then you will be able to take this position. In fact it would need to be a bit better than that other wise you would end up with a margin call pretty quick so may be 50:1 would be ok here.

In this case 50:1, 100:1, 200:1 or 400:1 will make no difference to your ability to take the trade!!! If you are using FXCM and you hold your trades for days then 50:1 will pay you interest on your positions.

Simon

I think that your trading style determines your leverage...It's the same old way, risk losing a $30 per trade on a 30 pip move or risk losing the same $30 per trade on a 15 pip move??? In both cases your risk is the same, but your leverage differs based on your trading style, system and strategy...If you think of max risk per trade a dollar amount, leverage is automatically adjusted and you don't need any calculators...


Thanks,

Nader

<sigh>