NG...I see what you're saying about the trader MAY purchase larger number of contracts...but this is STILL risk versus leverage. A good trader will know what the risk model is based on the account value. As stated earlier, if the risk model calls for buying 1 standard lot, just because you CAN buy 4 more for the same margin doesn't mean you SHOULD buy 4...
What you're saying is that if YOU had the ability to buy more, you would actually take advantage of the leverage. This isn't necessarily the case with everyone.
This is why it's important for everyone to understand the difference. If the risk model calls for a trade to lose no more than $200 on a trade, this has nothing to do with your leverage. It has to do with how much risk you can take on. If you purchase 4 standard lots in the EUR/USD, that means you can move 5 pips before you get stopped out. But this would be true whether you had 100:1 leverage or 1000:1 leverage...right? Buying 4 lots is buying 4 lots.
There are traders who max out their leverage, but that's a personal risk thing. What makes 400:1 leverage dangerous is if you're apt to gamble (take on unnecessary risk)...but 400:1 leverage does not preclude losing 4x faster than having 100:1 leverage.
Young traders should really understand this point. Seriously...
I would add a couple of points, simply because I feel I may be able to add value to this discussion
1. Higher leverage lets you have open multiple trades while managing your risk with stoploss. i.e. trade 60000 GBP/USD with a 10 pip stop. If you are on, say Oanda, with a $3000 account at 50:1 margin requirement, you can not put on much more of a trade, even though only 2% of your account is currently at risk. This is b/c at 50:1, the margin requirement for 60,000 GBP/USD is appx $2300. You can determine this by taking trade size (60,000) and dividing by leverage (50) and then multiplying that by the exchange rate for whatever currency you are looking at.
2. I understand fxSol permits hedging. Lets say you wanted to hedge against half the position stated in #1, again with a $3000 account (i don't know alot about hedging, so I may need correcting here). If you were still at a 50:1 leverage the margin required to hedge half your original position would be equal to an amount half as large as the original margin requirement. So 2300, divided in half, plus $2300 is $3450 and you would have insufficient funds. A higher leverage takes care of this problem by reducing required margin (as Dials referred to earlier in this thread, i believe).
I believe the big thing about having high "leverage" (aka low margin requirements) is simply flexibility. As has already been said in this thread, risk management is its own animal.
haha not that I really know anything! please correct & elucidate as necessary
natediggity
