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Leverage

  • #1
  • First Post: Dec 15, 2009 10:16pm Dec 15, 2009 10:16pm
Hello fellow traders!! Im trying something out for fun but need help with something.... Say if a put in 50 dollars into an account how much leverage is need o bet half or my full account? Please reply.. At the end of jan I will be posting again with the results of my account!
  • #2
  • Dec 15, 2009 10:31pm Dec 15, 2009 10:31pm
1:1

leverage does not determine your risk. Also you cannot risk 100% of the account because you will get margin called prior to reaching zero.

The amount you risk is determined by the lot size and your stop size.
  • #3
  • Dec 15, 2009 11:33pm Dec 15, 2009 11:33pm
Im only trying to risk 40% or 50%.. I know its crazy but like I said its fun to try new things and plus I have some extra money from other accounts! I guess I dunno why brokers wont let you bet half of your account? Its in their favor!! With a large leverage you have more margin control right? The larger leverage the small margin? If this is correct, wouldnt I have to have a big leverage like 500 or 700 to be able to bet 40%-50% of my account?
  • #4
  • Dec 16, 2009 12:06am Dec 16, 2009 12:06am
The issue is not so much margin control BUT risk control.

You determine the risk in terms of percentage of your equity related to the amount of pips of your stoploss. And this will then define your position size, which in turn affects the margin required.

Examples:

$50 equity, $25 risk (50%)
Case 1: 25 pips for 0.1 lot ($1 a pip) position size 10000 units (one mini-lot)
Case 2: 50 pips for 0.05 lot ($0.50 a pip) position size 5000 units (5 micro-lots), etc...

The greater the stoploss needed, the lower the position size will have to be for the same risk.

At 50:1 leverage, margin required would be around $200+ for case 1, $100+ for case 2, etc...
At 100:1, $100 or $50, etc.
At 200:1, $50 or $25, etc.
At 500:1, $20 or $10, etc.
(I don't know about any broker going over the 500:1 mark.)

So indeed you would have either to lower your position size or get the higher leverage:
at 50:1 - maximum position size around 1 micro-lot or 1000 units ($0.10 a pip);
at 100:1 - around 2 micro-lots
at 200:1 - around 5 micro-lots
and at 500:1 you could use 1 mini-lot.
  • #5
  • Dec 16, 2009 1:51am Dec 16, 2009 1:51am
After you've found the answer, please consider another thing. Conditioning yourself the wrong way. You have a couple of fine trades on that small account, possibly double your deposit in 5 days. And start thinking you can do the same with a king-kong sized account next month. And you put all your savings in it, and you go broke and we read your sad story on another thread. Happened before, will happen again, only the names change.

Forget the leverage and be careful.

Quoting drago24
Im only trying to risk 40% or 50%.. I know its crazy but like I said its fun to try new things and plus I have some extra money from other accounts! I guess I dunno why brokers wont let you bet half of your account? Its in their favor!! With a large leverage you have more margin control right? The larger leverage the small margin? If this is correct, wouldnt I have to have a big leverage like 500 or 700 to be able to bet 40%-50% of my account?
forget about tomorrow, just steal away into the night
  • #6
  • Dec 16, 2009 2:00am Dec 16, 2009 2:00am
Quoting spekitox
After you've found the answer, please consider another thing. Conditioning yourself the wrong way. You have a couple of fine trades on that small account, possibly double your deposit in 5 days. And start thinking you can do the same with a king-kong sized account next month. And you put all your savings in it, and you go broke and we read your sad story on another thread. Happened before, will happen again, only the names change.

Forget the leverage and be careful.

Lol nope Im only tryin to see if I can turn 50 into 1000 thats it.. If I dont make it o well its only 50 bucks!!! I would never do this on account that was big money! Thats not smart at all!! Thanks to those who posted!! what broker can I use that allows 500:1 and that will allow a $50 micro account?
  • #7
  • Dec 16, 2009 2:04am Dec 16, 2009 2:04am
Quoting spekitox
After you've found the answer, please consider another thing. Conditioning yourself the wrong way. You have a couple of fine trades on that small account, possibly double your deposit in 5 days. And start thinking you can do the same with a king-kong sized account next month. And you put all your savings in it, and you go broke and we read your sad story on another thread. Happened before, will happen again, only the names change.

Forget the leverage and be careful.

I strongly agree. Once you learn something it's EXTREMELY hard to unlearn it. Even if it seems like a harmless $50.

I don't want to sound like a downer but, the best thing that could happen to you if you do this, is you lose your $50 quickly.

If you make a good return it will positively reinforce a bad habit, which can turn out to be an account killer down the line.

Proceed with caution!
  • #8
  • Last Post: Dec 16, 2009 2:33am Dec 16, 2009 2:33am
Quoting drago24
Lol nope Im only tryin to see if I can turn 50 into 1000 thats it.. If I dont make it o well its only 50 bucks!!! I would never do this on account that was big money!
Be careful, if you succeed in turning 50 into 1000, you might believe you can turn 5,000 into 100,000.

I had my money management together for quite a few months, and then had one extremely profitable, but highly irresponsible trade. Then I thought....

"Well that was awesome! Let's do it again"

Cost me 30% of my equity.

I trade a micro account so it's not "life-changing" in dollar amounts, but when you figure out how long it takes to make that 30% back with reasonable risk control and a newly diminished account balance, it gives you a lot of perspective.
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