Why to stay Away from any broker who offers you more than 100:1 leverage? Leverage is one of the key factors in trading forex and is especially very attractive for new retail traders and that’s why so many forex Retail traders are attracted to forex thinking they can make lots of money overnight. This is why more investors trade forex than any other markets since you can generate lots of money by putting up very small amount of money up front. Leverage is a double edge sword you can make lots of money but at the same time you can lose lots of money too. So I would like you to ask yourself these Questions: 1.why a broker would give you bounces? 2.Do you think your current broker is a Real ECN/STP? 3.Why your broker is giving you more than 100:1 leverage? 4.Is it possible for a broker to offers you spreads starting from 0.1? 5.Do you think your broker is a real ECN/STP if they offer you different account size with different spreads? Before I answer these Questions it’s good to know we have 2 type of technology. Called A book and B book. In A book all your orders will be match either internally within the brokerage clients or if order cannot be matched will be routed to a Bank or other brokers or LPs. They take no in house risk on your trades and they simply charging you a commission for the technology they are providing you.Or sometimes instead of charging you commissions they markup the spreads. So a true STP/ECN broker will not benefit from your losses.A true or reliable STP /ECN broker will be connected to multiple liquidity providers thus providing both a strong market depth and a better fill ratio for their clients. To take it a step further, a successful and financially stable broker will have a Tier 1 Prime Broker (PB) relationship or a relationship with a reputable Prime of Prime, where trade settlement occurs. So a true STP/ECN broker will be getting interbank Leverage from 5:1 to 25:1 maximum leverage depending on so many factors such a how creditworthy the company is with its bank.So trust me Leverage more than 25:1 in a tire 1 Bank and even through a Prime Broker is unheard of. I barley hear a broker can get a 40:1 leverage from any Tire 1 bank.So it’s the brokers choice to offer and maintain its margin account with their bank and avoid a margin call. The same way you have to be responsible to keep you account from getting margin call with your broker.so same responsibility for everyone.so now if you think about what I just said you see how hard will it be for a broker to offer you a 200:1 leverage mean while they get a maximum of 25:1 from their own bank.In order to offer high leverage, the broker would have to put up many times more capital to sustain positions than what their clients would be required to maintain with them. Example : lets say a client will place a EURUSD=1.1010 5,000,000 at 200:1 leverage to calculate the margin required (1.1010*100000)/200= $550 Example of margin your broker has to put up for you to trade the same amount (1.1010*100000)/25 =$ 4400 So the more leverage the more money the broker has to put up. In the example above your broker has to put up almost 8 times more money than you do for the same trade size. Lets use a 500:1 leverage example You trade the same lots (1.1010*100000)/500= you put $220 Your broker for 1 lots trade at 25:1 will have to do (1.1010*100000)/25 =4400 So our broker in this case has to put 20 times the money you put in to maintain the same trade size. So why would a broker do that and give you high leverage? Meanwhile in most cases if you multiply the margin for one client times X number of client that a broker may have = lots of money that you can imagine. I’m most cases your broker will get a margin call with their tire 1 bank before a client gets a margin call. So client can make money in a position that a broker is taking a loss. So remember SNB and what happened then lots of brokers went bankrupt? So if you hear a broker Claiming they offer institutional liquidity and working with a Tire 1 bank and offer anything above 100:1 leverage don’t think they are your honest broker and they want you to make money. I grantee you they are running a deal desk knowing 97% of hungry retail trades are going to lose their money within the first 2 years of learning this business. They will offer you bounces high leverage. And low man made spread. Keep in mind average true Spread should be around 0.3 to 0,6 so anything less than this is manmade and they add the rest to their commissions to cover the discounted spreads. To be continued …………
Why to stay Away from any broker who offers you more than 100:1 leverage? Leverage is one of the key factors in trading forex and is especially very attractive for new retail traders and thats why so many forex Retail traders are attracted to forex thinking they can make lots of money overnight. This is why more investors trade forex than any other markets since you can generate lots of money by putting up very small amount of money up front. Leverage is a double edge sword you can make lots of money but at the same time you can lose lots of money...
Why to stay Away from any broker who offers you more than 100:1 leverage? Leverage is one of the key factors in trading forex and is especially very attractive for new retail traders and thats why so many forex Retail traders are attracted to forex thinking they can make lots of money overnight. This is why more investors trade forex than any other markets since you can generate lots of money by putting up very small amount of money up front. Leverage is a double edge sword you can make lots of money but at the same time you can lose lots of money...
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thank you
more, please..
“Hope is [a] bogus emotion that only costs you money.” - PETER LYNCH
{quote} Sir, i still do not understand, so when you say : bid at 1.1165, what does it mean ? thanks for the explanation
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Bids means buyers and offers means sellers.
Keep in mind some times when we have heavy bids price moves down by couple of pips before moving up.
I explain everything in our groups.you are more than welcome to join our free groups. http://eepurl.com/bQet5r
bank of Amercia and BNP they were active in EURUSD today, They are bidding every chance they get, I think most likely they are targeting 1.13 area. I post updates if i see any changes
{quote} Bids means buyers and offers means sellers. Keep in mind some times when we have heavy bids price moves down by couple of pips before moving up. I explain everything in our groups.you are more than welcome to join our free groups. http://eepurl.com/bQet5r
Forex Level II (Market Depth) follow me with order book
