Our Biggest mistakes is Over Leverage! | Forex Factory

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Our Biggest mistakes is Over Leverage!

  • #1
  • First Post: Jan 30, 2016 2:00am Jan 30, 2016 2:00am
After years of trading and burning a lot of live accounts, I realize that A lot of traders tend to do is over leverage.
With a 1000USD account, you dare to open 1 Lot position. ( 100.000 Units).

I'm starting a new account with Only EMA 200 and Bollinger Bands trading stategy. I hope I can prove myself, because in the end price always tend to retrace back either to 50 or 61.8 Fib. As long as you don't over leverage, even in a trend storm, we can always surpass it.
Biggest Mistake ? Over Leverage
  • #2
  • Jan 30, 2016 3:30am Jan 30, 2016 3:30am
Being cautious (using moderate or low leverage) and being right (correct estimation and prediction of price movement) are two different things. Low leverage with incorrect market analysis (or incorrect execution) is sure to deplete the account as well, though slowly. But it does give the trader a chance to learn from his mistakes, and thereby eventually be right more times than be wrong.
  • #3
  • Jan 30, 2016 3:40am Jan 30, 2016 3:40am
Quoting sing2x
After years of trading and burning a lot of live accounts, I realize that A lot of traders tend to do is over leverage. With a 1000USD account, you dare to open 1 Lot position. ( 100.000 Units). I'm starting a new account with Only EMA 200 and Bollinger Bands trading stategy. I hope I can prove myself, because in the end price always tend to retrace back either to 50 or 61.8 Fib. As long as you don't over leverage, even in a trend storm, we can always surpass it.
You can open a 1 lot position on EURAUD @ 500:1 leverage with 'only' £152 in the account, each pip is worth just under £5 so if you was going for 10 pips at a time that's losing or gaining a third, so with a £1000 account going by the same idea, you are initally losing/gaining 5% of the account, or around £50.
  • #4
  • Jan 30, 2016 3:44am Jan 30, 2016 3:44am
You probably mean taking high risk is the biggest mistake. Because the high leverage is not a mistake, it is an advantage. The higher the leverage is, the less funds the trader needs to deposit to the broker. And if the trader lost his funds , it was not caused by the leverage, but rather by his risk settings.
  • #5
  • Jan 30, 2016 3:48am Jan 30, 2016 3:48am
I'm starting a new trade explorer. Because I believe in every move there's always a retracement. That's why if we don't overleverage, we can start a grid ( averaging ), and will close the trade in profit. Like My last trade on AUD/USD, when I'm on a wrong position , buying from 0.73xxx but because I trade on 0.01 increment, eventually it goes back to 0.713xx ( 61,8 ), And I can close all the trade basket with profit.
My method right now is very simple, I will update if things turn out to be good in the next few month.
Biggest Mistake ? Over Leverage
  • #6
  • Jan 30, 2016 4:18am Jan 30, 2016 4:18am
Quoting sing2x
I'm starting a new trade explorer. Because I believe in every move there's always a retracement.
You are correct... Every market move does retrace some. However, good luck absorbing a move like this... The rush to the dollar for safety drove the GBP/USD 6000 pips straight down before retracing back more than 3000.
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"Don't fear a bubble until it starts to burst."
  • #7
  • Jan 30, 2016 4:58am Jan 30, 2016 4:58am
Quoting sing2x
I'm starting a new trade explorer. Because I believe in every move there's always a retracement. That's why if we don't overleverage, we can start a grid ( averaging ), and will close the trade in profit. Like My last trade on AUD/USD, when I'm on a wrong position , buying from 0.73xxx but because I trade on 0.01 increment, eventually it goes back to 0.713xx ( 61,8 ), And I can close all the trade basket with profit. My method right now is very simple, I will update if things turn out to be good in the next few month.

Why don't you martingale as well? You need a HUGE SL also to wait for your retracements.
  • #8
  • Jan 31, 2016 3:35am Jan 31, 2016 3:35am



Quoting Halley
You probably mean taking high risk is the biggest mistake. Because the high leverage is not a mistake, it is an advantage. The higher the leverage is, the less funds the trader needs to deposit to the broker. And if the trader lost his funds , it was not caused by the leverage, but rather by his risk settings.
  • #9
  • Feb 2, 2016 12:03am Feb 2, 2016 12:03am
Quoting meanvel
{quote} You are correct... Every market move does retrace some. However, good luck absorbing a move like this... The rush to the dollar for safety drove the GBP/USD 6000 pips straight down before retracing back more than 3000. {image}

I don't think we need to follow 6000 Pips to get back to profit bro. every day there's a retracement.
What I want to say is if your leverage is small, you never need to set any SL.
Better 1 USD profit than wipe out.

If you're leverage is something like 1:20 on EUR/USD, I don't think we ever need to cut loss
Biggest Mistake ? Over Leverage
  • #10
  • Feb 5, 2016 7:52am Feb 5, 2016 7:52am
Even I already trade a long time, I still cannot manage my emotion and greed. I open too many position and overleverage again.
Although last NFP report helped and I managed to closed all the open position, but that because I add 100% to my equity, if not surely I already wiped out.
Biggest Mistake ? Over Leverage
  • #11
  • Last Post: May 31, 2016 1:18pm May 31, 2016 1:18pm
Quoting sing2x
Even I already trade a long time, I still cannot manage my emotion and greed. I open too many position and overleverage again. Although last NFP report helped and I managed to closed all the open position, but that because I add 100% to my equity, if not surely I already wiped out.
You're on the right track and you have the right mentality.

Over-leverage IS the cause of blown accounts.

This will guarantee failure:
-Over-leveraging at 50+ to 1,
-risking 7, 10, 35% per trade (especially if a trade signal is generated every day)
-Using no stop loss or adding to losing positions



I believe you should refine your strategy. I would classify it as a mean-reversion strategy. The problem with this strategy is you tend to win little and lose big.

If you win in a mean reversion, you gain is limited to the difference between where the price was when you took the position and where the 200 EMA is at time of exit (Which I am assuming is your exit point)

On the other hand, when you lose, you can be spectacularly wrong.

But you're on the right track
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