Is high leverage really bad for you?

Hello traders,

one of most common used "rules" of trading is that "high leverage will kill you".
But when I think about it I'm not so convinced that is true. I look on leverage as a tool that broker provides you and one should use it as a tool.

Some simple explanation on how I look on high leverage:
Let's say that I have 10k budget for trading.
Option 1 is to load all 10k on my account and use for example 1:100 leverage. If then I want to open a position with 1 lot then margin requirements are 1k and if things really go bad i will have a stop out when i have just 300€ on my account (30% of margin=stop out). So at the end I lost 9.700 €.
Of course I could have some risk management rules to set my maximum loss when 20% of the account is lost - that means I lost 2k and have 8k left on my account at the end of that trade.
Option 2 if I use 1:500 leverage, then for 1 lot I need 200€ margin. So I dont have to load 10k, but only 2k on my trading account. And again if things go really bad after stop out I have left cca. 65€ (30% of margin).

So, with option 1 I lose at least 2.000€ (or even 9.700€ if I let it run). And with a balance still at 8k I am wery likely to do some stupid revenge trade or something which probably fucks me up some more. You know that happens
With option 2 I lost 1.935€. I still have a chance for a revenge trade for that 65€ but that is it. Then I have to load my account again (takes time - opportunity to calm down and analyze). And I can do that 5 times with a 10k budget.
Also it is better for me to have my money in the bank if I dont really need it for trading (talking about that 8k).
Risk management for me is better if I have 2.000 account (and stop out is the final limit) than to have 10.000 on my account (and 20% of balance is my final limit).

The only better thing would be not to use leverage at all. But then you need a lot more than a 10k budget.

Please comment and explain your wiew! Maybe I'm missing something important in my calculations.
Happy trading

Yes, high leverage will make you suffer from severe headache and illness

And oh by the way its the trading systems section here

Heh, yes, sorry about that. When I posted it I saw the mistake. Can I move the thread?

No, high leverage will make you suffer from severe headache and illness only if you don't understand it.

http://www.forexfactory.com/showthre...82#post9208682

I think LuXing in this post covered it pretty good.
As recent CHF unpegging or Brexit showed, black swans can and do happen. Or even just spikes on news, or even broker software malfunctions.
Once happened to me that a 6k balance went in about 20 sec due broker software opened a trade on GJ mere 300 pips away from current market quote.
Was credited back same day, but man, was i feeling confused by the events!!

High leverage, handling a part of the total assigned capital can be a weapon in hand vs. these, and the answer against negative balance caused on ignored SL, or cash tied up at bankrupt broker.
The non instantly available funds might also defer some of the revenge trading urge even.

AGREE...

High leverage account = Good for you
High leveraged investement = Not Good for You

High leverages demand heavy experience to handle the negative sides that come with it. For new traders, 1: 10 is cool enough.

When people talk about that high leverage is bad for you they mean the actual used leverage and not that crazy number your broker offers you. Leverage simply means you buy more than you can actually afford - buying houses using a mortgage is some sort of leverage too.
It is however quite common on forums like these to treat leverage and required margin as the same thing - that's where the confusion starts.
Buying 500 times more than you can actually afford is pure gambling, whether that's a good or bad thing is up to you to decide but it certainly isn't classical trading any more.

BTW: the idea of measuring your risk in leverage is slightly flawed, my suggestion is to look at the number of pips. Buying 100k of AUDUSD is a lot less money than buying 100k of GBPUSD yet the value per pip is the same.

Without high leverage I wouldn't have been able to use martingale and make money in the past. Now I'm not using MG anymore, still without high leverage I wouldn't be able to trade 10-20 pairs simultaneously. So the answer is "NO".