Why leverage does not matter | Forex Factory

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Why leverage does not matter

  • #1
  • First Post: Edited Mar 19, 2020 8:12pm Jul 31, 2019 11:01am | Edited Mar 19, 2020 8:12pm
Moved to another place.
Work work.
  • #2
  • Jul 31, 2019 11:36am Jul 31, 2019 11:36am
Quoting Peon
Preface: Leverage is an important part of trading. Just because the title of this thread says does not matter does not mean disregard what leverage is altogether. What is leverage? "Leverage involves borrowing a certain amount of the money needed to invest in something (1)". What does that mean in my terms? Leverage allows you to utilize more capital than what you actually have on the account balance. In simplest terms: More margin. Now you see many brokers that offer 1:20 to something crazy like 1:1000 leverage. Does this mean that you need that...
Thanks for your long detail thread! But I really surprised when I see; few traders are relaying on only big trading leverage like 1:1000 even more!!
  • #3
  • Jul 31, 2019 11:43am Jul 31, 2019 11:43am
Quoting ZikriIrfan
{quote} Thanks for your long detail thread! But I really surprised when I see; few traders are relaying on only big trading leverage like 1:1000 even more!!
Personally, I use the highest possible. Why would I strangle my account balance? Even though I have a high leverage, it is all about properly using it.
Work work.
  • #4
  • Jul 31, 2019 12:51pm Jul 31, 2019 12:51pm
In the end it all depends on your trading system. Generally bucket shop brokers would LOVE to teach you scalping and how to use leverage to "your" advantage. Trade safe
  • #5
  • Aug 1, 2019 1:15am Aug 1, 2019 1:15am
i try to use high, but you know there are consequences to it. though with proper risk management it can be used to our advantage.
  • #6
  • Aug 1, 2019 3:12am Aug 1, 2019 3:12am
Usually, I avoid using high leverage as still I feel that I am not so good at risk management.
  • #7
  • Aug 1, 2019 8:50am Aug 1, 2019 8:50am
Quoting Felix.me
Usually, I avoid using high leverage as still I feel that I am not so good at risk management.
Money management and leverage do not really correlate.

Money management : Amount of money you risk per trade.

Leverage : Amount of borrowed capital the broker allocates to you.

The higher the leverage, the more margin you have to trade with.

Imagine living in a 100x100 meter box. You might use up 50x50 meters. You don't have to take up 100x100 meters of space, that would be very cramped. There should be some free space for you to walk around. Think of leverage like this. Money management is the *stuff* that you place in that box and leverage is the space given to you. You said you are not good at risk management; so tidy up that *stuff*.
Work work.
  • #8
  • Aug 3, 2019 5:13am Aug 3, 2019 5:13am
Leverage is important when you know what you are doing. I recommend you not to try high leverage accounts at the beginning. You can deplete them very easily.
  • #9
  • Aug 4, 2019 1:42am Aug 4, 2019 1:42am
i think you have considered high leverage as high risk , but i am not agree with you , if there is any risk that means there is no money management with no -sense trading planning , nothing without it.
  • #10
  • Aug 4, 2019 2:47am Aug 4, 2019 2:47am
Of course available leverage doesnt matter, it only matters how you use it. The problem is most people start overleveraging their trading when chasing the losses and thats when they get wiped out.
  • #11
  • Aug 4, 2019 4:34am Aug 4, 2019 4:34am
leverage contains huge risk from all financial tools in Forex trading , so when using leverage traders should make sure powerful analyzing risk managing plan, otherwise trading can be useless.
  • #12
  • Aug 7, 2019 4:25am Aug 7, 2019 4:25am
Two years back I was very concerned that the new ESMA leverage restraints in the EU would throttle my trading. Possibly I would be driven out of private retail trading and forced to either make my account 10 times larger (somehow) or leave trading for good.

In the end, I find I can continue to trade much now as then, long-term trend-following. Basically, if there's a multi-day trend amongst the 28 major forex pairs you can bet I am in it. Positions right now are small - 1.5% account capital risk with stop-loss at 3ATR20 from entry. On that basis, with a mix of 1:20 and 1:30 leverage positions I find I can hold open about 20 positions without breaching the margin limit.

I suspect the guys who suffer from leverage restraints are day-traders. I don't day-trade.
  • #13
  • Edited 2:12am Aug 9, 2019 1:34am | Edited 2:12am
Quoting tomorton
I suspect the guys who suffer from leverage restraints are day-traders. I don't day-trade.
You are confusing things here; and the thread-starter is confusing things (I think). Leverage and margin are reciprocal. Initial margin ("margin") is the amount of (your own) money that you require (that your broker requires you) to hold up for a position. Basically, if one broker gives you ten times the leverage of another broker, it also means that this broker requires you a tenth of your own money (in comaprison to the other broker) to put up to get into/hold a position. How you use this is up to you. It can mean that you are able to trade ten times the size (in total), or it can mean that you need only one tenth of the deposit to trade the same size (in total).
Here an example: If a position would be worth 20000, and your max leverage is 10 (10:1), and your deposit is 1000, you cannot buy that position, because the required margin is 2000 (1:10), and you have only 1000. However, if your max leverage is 100 (100:1), you can buy that position, because in this case the required margin is 200 (1:100), while you have 1000.
Return To Disorder
  • #14
  • Aug 9, 2019 4:05am Aug 9, 2019 4:05am
Quoting rockit
{quote} You are confusing things here; and the thread-starter is confusing things (I think). Leverage and margin are reciprocal. Initial margin ("margin") is the amount of (your own) money that you require (that your broker requires you) to hold up for a position. Basically, if one broker gives you ten times the leverage of another broker, it also means that this broker requires you a tenth of your own money (in comaprison to the other broker) to put up to get into/hold a position. How you use this is up to you. It can mean that you are able to...

I know all this which you have posted. And it seems like Peon does too.

Where do you see we are confused?
  • #15
  • Aug 9, 2019 11:27am Aug 9, 2019 11:27am
Quoting tomorton
{quote} I know all this which you have posted. And it seems like Peon does too. Where do you see we are confused?
I have stated your sentence in question. Leverage is not something that in particular day-traders are concerned with. It is a question of how much money one wants (or can afford) to deposit with the broker, and (or) how much one imagines to have in return. This way, it is never wrong to have more leverage at disposal, of course, if one knows what he is doing.
Concerning Peon: He is talking about having 'more margin'; I would put it the other way around: your margin requirements are lower.
Return To Disorder
  • #16
  • Aug 9, 2019 11:54am Aug 9, 2019 11:54am
leverage of course is a matter in Forex trading ,
from all financial trading instrument it contains huge risk .
so take leverage as an important issue when trading in practical.
  • #17
  • Oct 12, 2019 12:55pm Oct 12, 2019 12:55pm
Good summary. I agree
  • #18
  • Oct 22, 2019 12:01am Oct 22, 2019 12:01am
Leverage doesnt matter, it only matters how you use it.
  • #19
  • Oct 22, 2019 4:04am Oct 22, 2019 4:04am
Quoting Dendro
Leverage doesnt matter, it only matters how you use it.
Exactly, leverage management is an important issue. In addition, aggressive trading leverage is always risky.
  • #20
  • Oct 22, 2019 10:56pm Oct 22, 2019 10:56pm
Quoting Adelhard
{quote} Exactly, leverage management is an important issue. In addition, aggressive trading leverage is always risky.
I feel relax when trading small. No need for trade management, just put a TP/SL and turn off the computer. I'm on demo though
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