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I don't want to use leverage

  • #1
  • First Post: Aug 17, 2012 2:05am Aug 17, 2012 2:05am
G'day everyone,

I have always been interested in the Exchange Market and I first got into Forex about a year ago. I used a demo for a little while and read up on a lot of pages, sifting through all the hype and crap, I used the 1-5min TF and found it was way too fast, screw this scalping business, I turned to the daily time frame and saw I could get a much clearer picture.

I then opened a tiny live account with $200 and a leverage of 100, which I managed to keep that account for about 2-3 months before blowing it. Now, I thought that was pretty good as I got to experience the fear, greed and all the emotions I hear about that I never got with the demo account. I took it as a lesson. So I did a little more reading and shortly after I opened another $200 account, this one did not last as long, I feel I was a little impatient as well as I was trying to trade Xau.

Since then I have been in between moving and I have not been able to set up properly or have the internet available. I still followed the price on the news though. Now I am ready to start again, although this time I would like to do it differently. I know I have a better understanding now and I have a lot more patience instead of just seeing dollar signs in my eyes. I still have a lot to learn though.

Anyhow, I was thinking about not using any leverage this time and I will only be sticking to the AUD. Gold will be the far future once I have more money.

I was never the best at math, my strong suit was art and music. So I would like a little help with something..

Say I deposit $1000 using no leverage and I buy AUD/USD at 1.00 that would give me 1000 units of the currency, the AUD then rises to 1.05 over the next week or so.

would the correct formula be:

1000x1.05
= 1050

I make $50 profit?

And in order to lose all my money the dollar would have to drop to 0. meaning if it goes down I can hold onto it until it comes back up because I wouldn't get a margin call?

Am I on the right track? I feel as if leverage, even 25 or 50 is for someone with a much higher capital to withstand all the drops.
  • #2
  • Aug 17, 2012 3:24am Aug 17, 2012 3:24am
Quoting RitalinFX
G'day everyone,

I have always been interested in the Exchange Market and I first got into Forex about a year ago. I used a demo for a little while and read up on a lot of pages, sifting through all the hype and crap, I used the 1-5min TF and found it was way too fast, screw this scalping business, I turned to the daily time frame and saw I could get a much clearer picture.

I then opened a tiny live account with $200 and a leverage of 100, which I managed to keep that account for about 2-3 months before blowing it. Now, I thought that was pretty...

You are correct. Not using leverage means that you will never buy more units then your deposit. If you deposit is 1000 and buy 1000, that is leverage of 1.

The leverage Brokers grant is actually credit. If you buy units up to the amount of your deposit, then you are not using credit and just working with your own money. The same if you were to walk to a bank and exchange your 1000 units. Obviously, there you get hit with 300 pips spread.
The pip value of the AUD/USD is 0.10usd ... so if you buy 1000 units... the price would need to drop 10 000 pips
for you deposit to be gone. Buy no way right? I would be buying AUD like crazy and buying all type y of real estate Up there. ... and thats the way flows ultimately goes. ..Until Interventions

That is a smart way to trade....It is good not to use more then 2 leverage ever.

J.
  • #3
  • Aug 17, 2012 3:42am Aug 17, 2012 3:42am
Thanks. The way I see it is if I went into a gold exchange and bought 1 ounce of gold bullion at 1600, I would need the price of gold to drop to 0 before I lost all my money. One day...

I don't like the leverage system but I can understand why people are keen on using it.

And yeah, the housing sector is pretty low right now, esp where I am. could be a good time to buy properties.


Cheers.
  • #4
  • Aug 17, 2012 4:35am Aug 17, 2012 4:35am
Actually, leverage is the best thing about FX market.
Granted it has to be used with care, like any high power tool.
  • #5
  • Aug 17, 2012 5:22am Aug 17, 2012 5:22am
My strong suits are the same my friend but I have a passion, love, and DEDICATION< to this business. I have traded gold and silver both physically and by means of paper for over 5 years and I can tell you 2 things off the bat.

They are not for newbies, to scalp or risk money on without a clear understanding of the driving FUNDAMENTALS then you can do all the tech analysis you want and I do not suggest elliot wave,

2. Gold is harder to trade than currencies, as there are far more driving factors involved. Read up, come by my thread (see my sig)

Every one Blows up accounts, it is almost a right of passage in this retail forex industry,

Now, about the leverage.

I don't think you should trade with 1:1
I do this now with gold and it is EXTREMELY expensive to even take a MICRO .01 lot, this will take about the spot price of one oz. out of my margin,nor do I suggest you trade gold YET.

Being that I am in the US, I am limited to a MAX 50:1 leverage , at first I hated it, now I would never trade 100:1 again.

Try 50:1, if it is still too much then go to what most banks use 25:1.


just my two cents. Hope this helps.

Also to position trade as you are talking about, you have to have a lot of patience, non - sticky fingers meaning, if the trade goes from 100 pips to 25 you LEAVE IT ON - PERIOD, this can only work once a clear trend has been identified.

You never know you may be ready for gold sooner than you think......
luck to you, PM me any time.

XT
Quoting RitalinFX
G'day everyone,

I have always been interested in the Exchange Market and I first got into Forex about a year ago. I used a demo for a little while and read up on a lot of pages, sifting through all the hype and crap, I used the 1-5min TF and found it was way too fast, screw this scalping business, I turned to the daily time frame and saw I could get a much clearer picture.

I then opened a tiny live account with $200 and a leverage of 100, which I managed to keep that account for about 2-3 months before blowing it. Now, I thought that was...
XAU-XAG/USD_Gold n Silver Trader's Thread = Technicals, Fundamentals & News
  • #6
  • Aug 17, 2012 5:36am Aug 17, 2012 5:36am
U should buy physical gold. Leverage in FX is used DUE to the EXTREMELY SMALL moves that we trade.

1000 pips which is HUGE in fx and could take a year can be squashed down to the same as 100 pips a good day on a major, with leverage.

keep in mind you are trading on the 4th fraction of a PENNY. that's why people use leverage, otherwise this market doesn't really move much.

Gold does, and that's precisely why it's so harsh on newbies, ------- I suggest you start out by following silver an even harder market than gold but invest in physical metal as you learn the monthly and weekly charts, after a while you will have them memorized.

the higher ones - 1 year - 5 year - 10 year etc are even easier to memorize.

Quoting RitalinFX
Thanks. The way I see it is if I went into a gold exchange and bought 1 ounce of gold bullion at 1600, I would need the price of gold to drop to 0 before I lost all my money. One day...

I don't like the leverage system but I can understand why people are keen on using it.

And yeah, the housing sector is pretty low right now, esp where I am. could be a good time to buy properties.


Cheers.
XAU-XAG/USD_Gold n Silver Trader's Thread = Technicals, Fundamentals & News
  • #7
  • Aug 17, 2012 5:59am Aug 17, 2012 5:59am
Quoting XTrade

Now, about the leverage.

I don't think you should trade with 1:1
I do this now with gold and it is EXTREMELY expensive to even take a MICRO .01 lot, this will take about the spot price of one oz. out of my margin,nor do I suggest you trade gold YET.
Being that I am in the US, I am limited to a MAX 50:1 leverage , at first I hated it, now I would never trade 100:1 again.
Try 50:1, if it is still too much then go to what most banks use 25:1.

I really do not understand your comment about leverage.
And suggesting NOT trading 1:1??

The leverage a brokers provide to the clients has nothing to do with the way a trader leverage the account. A Broker can give 50:1, 100:1, 500:1... it does not matter. The only thing that means is that for each unit of deposit you can buy "up to" 50 units, 100, 500 units etc.

If a brokers grants you 100:1 it does not means you are "trading" 100:1.

Have you ever traded 100:1 or 50:1?? I doubt it.
That would means that if you had 1000usd deposit .. you would have been trading 1 full lot. (100 000 units).. That would be crazy .. 50:1 is crazy, 25:1 is crazy.

J.
  • #8
  • Aug 17, 2012 6:02am Aug 17, 2012 6:02am
Quoting XTrade
U should buy physical gold. Leverage in FX is used DUE to the EXTREMELY SMALL moves that we trade.

1000 pips which is HUGE in fx and could take a year can be squashed down to the same as 100 pips a good day on a major, with leverage.

keep in mind you are trading on the 4th fraction of a PENNY. that's why people use leverage, otherwise this market doesn't really move much.

Gold does, and that's precisely why it's so harsh on newbies, ------- I suggest you start out by following silver an even harder market than gold but invest in physical...
Wow, Xtrade, you are the last person I would have expected to see a post from.

I have actually been following your thread for about a year now. I always look out for posts from you and Bemac.

Physical gold/silver is what I would really like to trade. And some of what you have said I have come to realize in the last year. It was the volatility of it that got me following xau/xag, naturally when I first started I saw the big moves and $_$ but I realize now it can be really harsh without the capital to back it up. A lot of the analyses I did came out right long term, but I did not have the patience back then nor the funds and so I would get out too early or panic when the price drop only to see it rise. But I need to learn the fundamentals more, the technical analyses I seem to be getting a good grasp on now.

I know I wont be able to trade gold without leverage for very long time, Im thinking more along the lines of longer term trades and investments. But I thought if I used 1:1 leverage on currencies my account could last longer and not worry about making money yet but just learning.

Thanks a lot for your input
  • #9
  • Aug 17, 2012 8:22am Aug 17, 2012 8:22am
To this day I do not understand the mentality that says "Big Leverage Will Destroy Your Account".

The only reason that this can happen is if someone doesn't practice proper risk management. Just because one has the ability to put on 8 different trades at the same time doesn't mean that you should.

When entering into a trade, one should have a pre-defined dollar amount one want's to risk as well as a predefined stop loss into which that risk will be spread out. Here's how it should play out.

Let's say that I intend to risk $50 on a particular trade. My system dictates that I use a 100 pip stoploss. I open up Firefox (a browser I don't usually use for anything but this task) which has the following website established as the homepage: http://tools.winnersedgetrading.com/RiskCalculator/

I select the "Amount" tick box and enter the parameters paying special attention to the amount of dollars risked and the number of risked pips....which is the stop loss value. I hit enter and the tool tells me what position size to use.

If I were using a different strategy that called for a smaller stop loss (say 15 pips) then I would just change that value when punching it into the tool.

The bottom line is that whether I'm running a 10 pip, 15 pip, 50 pip, 100 pip, or 500 pip stop loss, I am always only risking $50.

Now here's the rub. I just posted on this in a different threat. If I have a $1,000 account and want to take that simple $50 risk...I CAN'T on a 50:1 leverage account because the margin requirements are larger than the $1,000 balance. How stupid is that? I can do so if I live in a different country, but I can't here.

The opposition would say that these regs were enacted to "protect" consumers like us. I guess the line of thinking is that, yes, there are people like myself who pre-define our risk but there are a LOT of people who simply don't do that. They'd like to say that there are people too dumb to do that, but nobody likes to use pejorative language like that AND there are specific strategies which work in the absence of a stop loss, but the people who are actually running those systems are few and far between, so the leverage limitations are in place to prevent the ignorant from blowing up their live money accounts before they have a chance to figure out how to trade properly. It's a type of underhanded, forced risk management program.

The whole line of thinking really stinks. It's really offensive. The underlying message is, "You're too dumb to make your own decisions, so we have to protect you from yourself."

To be honest, I really feel bad for those who think that leverage is a scary monster hiding in the closet ready to jump out and tear you up. The leverage requirements may stave off failure for a while, but it's only a matter of time. Why? Because the underlying thinking does not take complete responsibility for one's actions in the market as Mark Douglas so clearly outlines in his book Trading in the Zone. Anytime we find a way to blame some aspect of the market (be it leverage or something else) for our losses, then our fate is sealed. In this situation, the answer is simply to define risk and lock it in. As long as you do this simple task, even on a high-leverage account, as long as you don't move your stop, you're at very little risk for your account being nuked.
  • #10
  • Aug 17, 2012 10:32am Aug 17, 2012 10:32am
Quoting RitalinFX
G'day everyone,

I have always been interested in the Exchange Market and I first got into Forex about a year ago. I used a demo for a little while and read up on a lot of pages, sifting through all the hype and crap, I used the 1-5min TF and found it was way too fast, screw this scalping business, I turned to the daily time frame and saw I could get a much clearer picture.

I then opened a tiny live account with $200 and a leverage of 100, which I managed to keep that account for about 2-3 months before blowing it. Now, I thought that was pretty...
I think you approach it the wrong way. Leverage is not your problem. You just don't have a profitable system. Even if you didn't use any leverage, you would fail in the long-term. Well except you just wait until the market comes back, but that can take years to decades (if for example you bought a couple of years ago the eur/usd at 1.6).
Rather try finding a good system.
  • #11
  • Edited 11:50am Aug 17, 2012 10:38am | Edited 11:50am
Quoting FXAssassin


Now here's the rub. I just posted on this in a different threat. If I have a $1,000 account and want to take that simple $50 risk...I CAN'T on a 50:1 leverage account because the margin requirements are larger than the $1,000 balance. How stupid is that? I can do so if I live in a different country, but I can't here.
.

Of course you can take a $50 risk with an account of $1000.

But you can not buy more then 50 000 units.

I am guessing you are trying to scalp..... like trading 1 lot and placing a 5 pips SL? ... well... that 50:1 is protecting you a bit.

Crap can happen anytime....if a gap happens while you place the trade... your stop is worthless... 100 pips spike.. your account is gone.

PS.. I posted in the other thread... If the leverage granted by the brokers is 50:1 ... that is 50 000 of your deposit currency. If you try to buy 0.50 eur/usd .. that is some 61 500 usd ... so at today price.. you could buy only some 0.39 of eur/usd... or 0.50 usd/cad, or 0.50 usd/chf etc... anything that is not over 50 000 usd.
J.
  • #12
  • Aug 17, 2012 12:02pm Aug 17, 2012 12:02pm
Leverage is not the issue at all here. Let me see if i can make this simple for you:

We will work with a mini account here because a $1000 standard account, you would not be able to make a trade due to Margin requirements.
$1000 account

Lets go short the NZD/USD - Margin requirements $180.00

100 PIP Stop

Risk - Roughly $100

Regardless what your leverage is.

50:1, 200:1, 400:1 Your risk is still $100

Make sure you have a trade plan, your entry, your exit, a stop loss, overall make sure you have a plan. Patience and Money managment is key to succedding.

If the above trade is a lost, you just lost 10% of the account. So you need to determine if that is an acceptable loss for one trade. If not then you need to modify your stop to what is acceptable. 2% is only 20 PIPS on a $1000 account.

To sum it up, your not on the right track. Leverage is good, you just need a better plan (Dont know what your plan is or was in the past so i will have to leave it at that.)

Hope this helps!
  • #13
  • Aug 17, 2012 12:43pm Aug 17, 2012 12:43pm
Quoting Ejhfx
Leverage is not the issue at all here. Let me see if i can make this simple for you:

We will work with a mini account here because a $1000 standard account, you would not be able to make a trade due to Margin requirements.
$1000 account

Lets go short the NZD/USD - Margin requirements $180.00

100 PIP Stop

Risk - Roughly $100

Regardless what your leverage is.

50:1, 200:1, 400:1 Your risk is still $100

Make sure you have a trade plan, your entry, your exit, a stop loss, overall make sure you have a plan. Patience and Money managment...
Hello efjfx:
Perhaps you don't understand the issue.
The issue is very clear in the first post... RitalinFX do not want to use leverage. .. thats is. and he made a question. He never referenced risk..
He just does not want to use the leverage that the broker grant him.

By his post, it seems he understand leverage better then most post.
Managing risk is just a complete different history.

Your post makes no sense...

Leverage is simple the "maximum" of units you can buy with your deposit.

Every body understand that a fixed loss is a fixed loss.
If you have 1000usd deposit and 50:1 you CAN NOT buy/sell more then
50 000 units of usd ... if you have 100:1 CAN NOT buy more then 100 000.
It does not matter if is 1 order or 20 orders... Jut never more then the Maximum granted.

Nothing to do with the risk you want or do not want to take.

J.
  • #14
  • Aug 17, 2012 2:34pm Aug 17, 2012 2:34pm
Quoting jeuro
Hello efjfx:
Perhaps you don't understand the issue.
The issue is very clear in the first post... RitalinFX do not want to use leverage. .. thats is. and he made a question. He never referenced risk..
He just does not want to use the leverage that the broker grant him.

By his post, it seems he understand leverage better then most post.
Managing risk is just a complete different history.

Your post makes no sense...

Leverage is simple the "maximum" of units you can buy with your deposit.

Every body understand that a fixed loss is a fixed...
Hey jeuro

Your right, RitalinFX never mentioned risk but he should have, He has already gone through a couple of accounts. Maybe I should have started off with asking some questions before just posting.

Lets face it, Leverage is simple, like you stated. I am not trying to tell him to use or not to use leverage, just trying to say that Leverage
may not be his issue.

Anytime you discuss trading you have to atleast be thinking about risk, imo. They kind of go hand in hand and if you want to be a successful trader you need to discuss Risk/Money Management etc.....


Enough from me....you all have fun.

Thanks
  • #15
  • Aug 17, 2012 2:38pm Aug 17, 2012 2:38pm
Using no leverage will not on it's own make you a successful trader, you need an edge first and foremost..
  • #16
  • Aug 18, 2012 1:45am Aug 18, 2012 1:45am
Quoting Ejhfx
Hey jeuro

Your right, RitalinFX never mentioned risk but he should have, He has already gone through a couple of accounts. Maybe I should have started off with asking some questions before just posting.

Lets face it, Leverage is simple, like you stated. I am not trying to tell him to use or not to use leverage, just trying to say that Leverage
may not be his issue.

Anytime you discuss trading you have to atleast be thinking about risk, imo. They kind of go hand in hand and if you want to be a successful trader you need to discuss Risk/Money...

I agree, at the end, as forex is about unpredictable, is all about risk, money management and math.

Zel132 is also right... we must have and edge first.

But also, by the forex nature, the perfect system does exist... you buy and not sell until you make a profit. But for that, one must exchange only your own money, not get in debt via the leverage the broker grants.

Some stuff from my teen years in my native country (long time ago) never leaves my mind. My father had a business and we knew well the business owners community.. we had many of foreign decent, like Lebanon, Turkey, Israel, Iran, Spain and Germany... all of them had a few thing in common: Hard workers, very intelligent, business minded, and all made deal with dollars (and most of their business were not import/export) Except the Germans that deal with land ... and all of them were financially well off.

It was quite simple at the time ... the dollars was regulated, you could buy it for some specific purpose only. If someone was traveling abroad, you could buy a maximum quota, if was more then you needed, you sell it to them, if was less then you needed.. you buy it from them.

Market making and speculation at its best. Guess what my father start doing? Dollars and Land.

40 years later, going thru high financial education, having worked for multinational companies, and trading full time the last 6 years.... in spite of all the sophisticated platforms and BS about the market .. the principle remains the same... you buy from who "needs/want/must" sell, you sell it to whom "need/want" to buy... with a nice markup of course.

If euro is going up hourly.. buy euros.. if dollars start going up hourly, hold the euros buy dollars..

It is a waiting game.. Smart speculators buy prudently according to their own ability to hold. If they were wrong, they admit it quickly and jump in the right wagon momentarily.... knowing they can hold until the other wagon turns around.

"All" speculators could be winners. If all dealt between their own financial capability, like the hedge funds and Banks do. Does anybody believe that a hedge fund would exposed themselves to more then a 1/4 of their working capital in a specific currency? meaning if the fund is a 100 millions, they would buy more then 25 millions of a currency?... No way indeed.

If all speculator dealt between their own means... and hold... the non-speculating market takes over and moves the price...and that in my opinion is happening most time then not... and fundamentally speaking at some point in time the crap from one country would be purchasable to make a profit and there goes the trend the other way.

Isn't this forex market wonderful?? I can do it from my home, I am in charge of my own money... not some sold out stock broker purchasing some crap stock with their own interest in mind. They give me credit... with the best interest rate in the world. I can buy euros with a credit in CHF over and over again at around 1.2005 for pennies of interest.. and on top of all, I can always count with the dumb speculators that will run out of credit somewhere along the road like the brokers and Banks do. shoot.. I believe they don't even need to manipulate then those 2 pips they always do.
But let them do it... lets keep catching some of those arbitrage.

that is my 2 cent.. like my 5 cents.

J.
  • #17
  • Sep 25, 2012 8:44pm Sep 25, 2012 8:44pm
Quoting RitalinFX

Am I on the right track? I feel as if leverage, even 25 or 50 is for someone with a much higher capital to withstand all the drops.

I understand your position. But as a trader, why would you not care about why others want to trade differently?

To say that you don't care about the leverage requirements of others (which you have so stated) is to say that you don't care what happens within your own industry.

Will you not care when trading forex is shut down entirely? And would this be partially a result of your "don't give a damn" attitude.

I have a few other comments for you but I'll save them.
When the Joker is in the deck.. fear not and play it well
  • #18
  • Sep 26, 2012 12:25am Sep 26, 2012 12:25am
Can't agree more!



Quoting ALThau
Actually, leverage is the best thing about FX market.
Granted it has to be used with care, like any high power tool.
  • #19
  • Sep 26, 2012 12:40am Sep 26, 2012 12:40am
You pussy.
What is any ocean but a multitude of drops?
  • #20
  • Sep 26, 2012 12:43am Sep 26, 2012 12:43am
Quoting Xhale12
You pussy.
and who might that be directed at
When the Joker is in the deck.. fear not and play it well
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