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High leverage vs Low leverage

  • #61
  • Sep 27, 2017 2:36am Sep 27, 2017 2:36am
From what I understand, Leverage does not affect your pip value. What affects your pip value is the volume of trade in lots. The higher the lot size the higher the pip value. High leverage gives your room to buy more, hence increase lot to increase pip value, which is more profit when you gain and more loss when you loose. If you have 500USD, you could buy more with a leverage of 1:500 and buy less with a leverage of 1:100. That is it. Where the actual risk lies if the volume of trade in one transaction.
  • #62
  • Sep 28, 2017 9:40am Sep 28, 2017 9:40am
Quoting PFvicky
From what I understand, Leverage does not affect your pip value. What affects your pip value is the volume of trade in lots. The higher the lot size the higher the pip value. High leverage gives your room to buy more, hence increase lot to increase pip value, which is more profit when you gain and more loss when you loose. If you have 500USD, you could buy more with a leverage of 1:500 and buy less with a leverage of 1:100. That is it. Where the actual risk lies if the volume of trade in one transaction.
…thus, passively higher leverage does really affect the pip value, as the higher it is the more you tend to increase your order lot size which consequently has a greater effect over the end result of the trade.
  • #63
  • Sep 29, 2017 4:34am Sep 29, 2017 4:34am
I think, new traders must work with low trading leverage, because most of them don’t know how to use a healthy trading leverage! Their intention is only making big amount of money by using a big trading leverage!
  • #64
  • Nov 14, 2017 2:46am Nov 14, 2017 2:46am
Quoting hals12
Hello, Which is better for a beginner : Having a high leverage with small position size or having low leverage with small position size ? I have 2 demo accounts both are loaded with $700 When I opened a position on my 1:500 leverage account (0.5 lot) the used margin was ~$100 so I had $600 free margin (Trade volume 50K) When I opened a position on my 1:100 leverage account (0.5 lot) the used margin was ~500 so I had $200 free margin (Trade volume 50K) Having a less free margin means less ability to handle floating loss and as you know the prices...
Position size is the main point.
With low leverage you CANNOT open a position that big to cause a margin call when it goes against you,with high leverage you can !With lets say 1:1000 you can trade easily a few lots having 500 bucks,but the risk is too high and the loss will wipe out a big piece of your capital,wich puts you way behind your plan to grow your account,so you hesitate to close the position or at least part of it.
In this case,start to close minilots one by one,you can hedge tye position also partially,entirely or more tyan entirely when the top or bottom is reached and YOU ARE SURE AND HAVE CONFIRMATION that the price will go further against you or turn back to where your position is.
The problem starts very much earlier
At the entry
As a trader,you have to know BEFORE where your sl is,of course at a level caused by price action or other evidence.
AND ALSO THE TP you have to know before you even open a position.With this factor s you have to decide how big the position has to be, not based on greed(how much you can gain)or fear(if the sl is hit)but on the fact that the price will move where you think,how it will do that and first and foremost WHEN ,and what are the risks it will make some breakout opposite(news release)while you are in.
Is your goal 1pip?10 ,100 or 1000? The more profit you expect,the bigger is the chance you have to wait out some retracements with possible reversals.
Trading 1min or 5min you can risk as much as possible because you watch the chart anyway and the only risk is a fast move because of news or other big capital moving in or out.And then a high leverage is great.When you trade with 2% of your capital it doesnt really matter what leverage you use.
  • #65
  • Nov 17, 2017 5:33am Nov 17, 2017 5:33am
Quoting NeilWagner
I think, new traders must work with low trading leverage, because most of them don’t know how to use a healthy trading leverage! Their intention is only making big amount of money by using a big trading leverage!
The trading leverage is a part of making profit but sometimes it causes a great loss if there is no risk managing plan. So before making profit by means of leverage it is more appropriate to ensure how to manage risk.
  • #66
  • Nov 18, 2017 5:08am Nov 18, 2017 5:08am
Managing risk is important but more important practicing how to use leverage. And that’s why I always use demo account when I every time use high leverage to see the performance how it works. This approach always helps me to avoid risk when live trading.
  • #67
  • Edited 9:56am Jul 8, 2018 9:36am | Edited 9:56am
I am having hard time understanding leverage and margin. Traders are saying that high leverage can wipe out your account, but I don’t see why. With HIGH leverage you will have lower margin and all you can lose is your margin – NOT your account. Isn't it? However, LOWER leverage will have higher margin and if we are poor money or risk managers, then we could lose much more.

As I see it, the most important thing is to have an OPTIMAL margin in an optimal environment, a relatively good trading strategy and a good money and risk management. For example, in a more volatile market it is better if a margin is higher (lower leverage), because there is more room for error. But, if a breakout is predicted, then it is better to have higher leverage (lower margin), because this will multiply your profits. If a market turns around and against you, then you will only lose minimum. In other words, I would adjust my leverage to the VOLATILITY of the market. I am not suggesting that we should use margin as a Stop Loss, but it seems to me that it is a kind of Stop Loss - it protects you from ruin.

So, in my understanding, margin call is a bad thing only if you have a Low Leverage and bad risk management. Also, it is a bad thing, if you have a High Leverage and your strategy sucks, because if Margin Calls add up, then slowly, but only slowly, they can wipe you out.

As a beginner trader, a complete and fearful noob, who only trades on a practice account, and who is extremely confused about this issue, I want to understand how this works. Am I thinking right? Or am I totally wrong? I am grateful for all good answers. Thank you very much.

P.S. Sorry for posting my question here, but Forexfactory does not let me to open a thread, because I am a new member.
  • #68
  • Jul 10, 2020 10:22am Jul 10, 2020 10:22am
Subs
  • #69
  • Jul 11, 2020 10:13am Jul 11, 2020 10:13am
What I'm about to write will go over many heads on here.

High Leverage is good for those few short-term traders who trade like this:

Total Risk Capital = $10,000

Daily Risk (5%) = $500

Therefore Leave in Your Bank Account = $9,500 ($10,000-$500)

Only Deposit = $500 in FX High-Lev Broker Account.

Use high Leverage (50-500) to Flip Account x2 to x12 times over 1-3 days.

Outcome,
a)Lose $500, and deposit another $500 from Debit Card
b)Win $2500, withdraw $2500 to Bank Account, leaving $500 in the FX-Leverage Account
for another 1-2days trading.

This means Largest Daily Loss is never Bigger than Largest Daily Win.
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  • #70
  • Edited 8:08am Dec 26, 2023 7:57am | Edited 8:08am
Quoting Profit Daily
Absolutely, high leverage is better. Your point is dead on, you would be margin called in one account and not the other. You still need to control the % you risk per trade of course. Basically, what high leverage does is allows you to make smaller deposits with the broker as opposed to needing to put your entire forex roll with them just to cover margin.

Yep and.......................what do you lose in a "black swan" event?????????????????
Your stop order will not be filled and the broker goes after you chasing you up for 50K????????????
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  • #71
  • Dec 29, 2023 11:39am Dec 29, 2023 11:39am
Quoting Harry6
{quote} Yep and.......................what do you lose in a "black swan" event????????????????? Your stop order will not be filled and the broker goes after you chasing you up for 50K????????????
How do you balance between potential profit and the risks associated with high leverage?
  • #72
  • Jan 2, 2024 6:07pm Jan 2, 2024 6:07pm
I think high leverage using will be better for you provided that you can control the percentage of risk per trade. But don’t go for it if you have small capital.
  • #73
  • Mar 15, 2024 3:04am Mar 15, 2024 3:04am
For beginners, the concept of leverage can be tempting. Multiplying your profit by 2000? Sign me up! However, it's crucial that you understand that leverage comes with both benefits and risks. Opting for high leverage allows you to open large positions with a small initial investment. However, it also increases your risk and can result in larger than expected losses.

On the other hand, low leverage means smaller position sizes, thus leading to smaller profits. Consider that you're a beginner though, we recommend using low leverage until you get a firm understanding of your risk tolerance, the market you're trading, and have built a robust trading strategy. Make sure you also set up take-profit and stop-loss orders.
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  • #74
  • May 16, 2024 8:25am May 16, 2024 8:25am
Hello,

If an expert advisor recommends a specific leverage, is there a lot of difference if I use a different leverage?
  • #75
  • Last Post: Jan 2, 2026 10:29am Jan 2, 2026 10:29am
From my opinion, both trades have the same exposure, so the price risk is identical in both accounts. The only real difference is how much margin gets locked, which affects how much free margin you have during drawdown.
More free margin just gives you more room to sit through normal price fluctuations, it doesn’t change how much you win or lose per pip. So your understanding of the margin behavior is fine, just keep in mind margin space and trade risk aren’t the same thing.
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