Horrible first question on leverage

So if I open a high leverage account $100 with 100:1 and


I go negative. Account is wiped out. Am I on the hook for $10,000? Will my broker send the Russian Mafia on me?

Considering how small $100 is in theory and how 90% of traders fail in forrex apparently I'm just wondering.

Seems like alot of initial risk for what is usually small profits in comparison.

I'm having extremely consistent good runs in demo and ready to put theory to work just wondering if I understand everything correct.


My goal for 2016 is not to be millions of dollars in debt. haha

Most of the brokers warn about the risk of losing more than the initial deposit ...

Unless the broker guarantee a negative balance, you will have to pay your debt ...

Some brokers have negative balance protections. It was implemented by some brokers after the CHF collaps. Many traders owed a lot of money to brokers and I guess some still do.

It's unlikely that account will end up with negative balance if you manage your risks. If it's a smalle negative balance then I think most brokers will not do anything. You can just change the broker and that's all.

All brokers have a certain margin call level where your trade will be closed.

Right, Leverage is ONLY the position you are allowed to open.

So with a leverage of 100:1, with a $100 account, you would be able to trade with $100,000, and this would give you the ability to trade with 0.01 lots (an equivalent margin of 1%)

That would mean that with an account of $100 you woudl be able to trade with 1 trade of 0.01 lot... You would not be able to open any more trades, as you woudl have used up all your margin.

at 200:1, you would have 0.5% margin, which means 2 trades of 0.01 lots could be opened or 1 trade of 0.02 lots.

Hope you can see that the more margin, only allows you to open either 1 big lot, or multiple small lots. It has nothing to do with how much you could lose or gain per say.

Along with that, you will have a margin call at most brokers where your equity value goes below 20%. When this happens, they will start closing the most unprofitable trades one by one until your equity rises above 20% (but of course your account will pretty much be blown!)

You will be able to draw out the $20> amount, and you will not owe the broker anything.

Oh, and 100:1 is not high leverage!!! That is pretty much the norm, from 50:1 (which i find quite restrictive, especially on higher timefames where you can have a lot more positions opened) to 300:1 is pretty standard - 500:1 and you are starting to push it a bit, as you can open lots more positions, but you are more likely to get a margin call....

Likewise, if you went into a negative balance, you woudl only be on the hook for your position - ie the points value would stay the same, so you would not end up needing to pay $100,000 - you would only need to pay the minus pips * your lot size, ie, 100 pips under the negative balance @0.01 lot, you would owe $10.

Forex is not worrisome, and if you have a regulated broker, you should be fine. If you stay away from the silly leverage (1000 and up) you should be just fine.

Leverage is effectively How much you need in your account to open up a position, the higher the leverage, the less of your account is needed to open it.

Ahm, 100*100 is 10,000 which is equivalent to 0.1 lot, not 0.01.

I agree. I don't think much about leverage, I think about number of pips to double or kill my account which results in a far lower leverage with AUD/USD than with GBP/USD for example. The question is risk appetite and the trading style. For example: using precise entries on the lower time frames while avoiding highly volatile times allowes for a much higher value per pip than going longer term where you have to give some more room.

That is a more than reasonable goal.
If you are more of a short term trader it is actually quite easy to significantly lower your risk of debt to your broker. Simply avoid news and don't have trades open over the weekend. Some crazy ones in a decade (or so) events like the SNB decision aside this is what makes people lose more than they had on their account.

Solid explanation!

Stop out ensures that you won't be in debt.

No, it does not. Weekend gap, big slippage during very important news releases both compared with high leverage is what gets you into debt because stop out or stop loss do not apply under these circumstances.

Fore sure NOT!
Especially with a true ECN.

A stop is an order , which is executed or not, depends if has a counterpart or not and your broker how do he like to play with you!
In January 2015 many CHF stops weren't executed on time & price, just a lot lower and the traders are in debts still !

If your broker offers NBP then yes

If it offers then is a MM, and then you will have other issues due to "extreme market conditions" Virtual spike of 80-160 pip.. where on the SL is filled the TP not, your winner trades are deleted... many others, check my posts, I have posted with FXPro a spike like 80 pip "from the air"

Here is another play if how MM are working:

You can judge if is real or fake or how are your money managed at brokers.

Better go to church each week or maybe all day if you are trusting a MM

Even a "real" ECN has uncommon cases, which are exceptional and it happens only with you and nobody else

Good luck with Negative Balance protection and guaranteed Stop loss execution and welcome bonuses

I prefer trading using high leverage such as 1: 1000. Trading using high leverage, the opportunities will be greater. if we are trading with small capital so it is better trading with high leverage

Yes , high leverage can brings profit very rapidly if we have the real risk managing plan with sufficient trading balance , otherwise we can fall a great loss when trading with high leverage.

Even though high leverage can bring profit very rapidly,
but according to me, the traders who are particularly newcomer always should avoid this due to lack of exact money managing plan
. because , despite of having up to leverage 1:1000 that’s not possible at all to make profit with certainly ,
if you don’t know how to manage money.

Making money very quickly by using leverage is not probable at all times, sometimes it causes a great loss due to non-sense planning as well risk managing approach. So great planning is a fact before using leverage.