publish2017-11-01 5:41 pm

backBack to the list of Articles

How Much Leverage Is Right for You in Forex Trades ?

forex leverageHow much leverage is right for you in forex trades is quite difficult to standardize, The best approach is to estimate it, basing on a percentage of your total investment capital to make it easier to understand and calculate it. The leverage size can help you to increase your profits and wealth faster, but it also carry a higher risk or cost when your prices anticipation are wrong since your potential losses also increase exponentially making this calculation a pivotal part of any trader money management plan. Professional traders always recommend to have the leverage below the 50:1 or 2% of your account balance.

What is Leverage?

Leverage is your credit line to trade with more money than your account balance or deposited amount of money in your account. In other words, leverage is a credit given to you by your broker to increase your investment capital whenever you consider or need it. The leverage used as collateral your deposited balance and it can be anywhere from 2:1 up to 400:1, which mean your broker allows you to increase your trading capital from 2 times more than your account balance to up to 400 times it. In the USA the maximum leverage for Forex trading is 50:1 is 50 times more than your account balance.

Understanding How Much Leverage Is Right for You in Forex Trades

Forex trade are done in lots with 3 different sizes: Standard lot 100000 Units, Mini lot 10000 unit and micro lots 1000 units of the quote currency.

Exchange rates variation are expressed in pip, which is the smallest price variation, it can be in the third or fourth decimal, e.g., EUR/USD 1.1200 a price increase to EUR/USD 1.1210 will be a 10 pips increased. Therefore a price increase of just a full cent can represent a 100 pips increased. EUR/USD 1.1300

Successful forex traders take less than 50:1 leverage, the possibility to raise your capital faster can make you take risky choices, and the forex trade is a highly speculative market in which prices can drops sharply in seconds without a real economical reason. No matter how safe a trade looks, professional traders never risk more than 10% of their investment capital on it. Successful forex traders always consider the leverage final cost if the price drops or their future exchange rate estimation are wrong to estimate this 10% investment stop point.

New forex trader should use from 10:1 to 25:1 leverage. When you are a new forex trader, you have to reduce your risk to the maximum. High leverages are the first reason for forex trader failure, and account wipeout since in a single wrong trade with high leverage can cost your total account balance or investment money.

In a nutshell, how much leverage is right for you in forex trades must be evaluated during your money management plan elaboration. A high leverage brings a higher financial risk, with the potential to empty your trading account after an incorrect estimated forex trade. The real leverage cost can be calculated by multiplying the leverage for the estimated pip price decreasing variation as a risk level measurement. The most recommendable leverage for forex trading is around 50:1 or 2% of your total investment capital. New Forex trader should start with less than 25:1 or 1 % leverage until they anticipate the future exchange rate correctly in more than 85% of his forex trades.

IQ OPTION TRY IDES BANNER

Relates Tips and tricks...

publish2018-04-25 5:49 pm

GameCredits Review- Cryptocurrency Guide

GameCredits is also known as GAME which is a project that is based on blockchain and it aims to become a single payment solution for the online gaming community. However, on the official website of the project, the team has shared their mission to become the universal currency for 2.6 billion players around the world.

Read more...

publish2018-04-24 3:24 pm

Humaniq Review - Cryptocurrency Guide

There are many other online banks that are making use of blockchain technology, but this project has taken a much expanded approach for online banking with the help of blockchain technology. However, the team aims to connect billions of people from around the world that have no access to the bank.

Read more...

publish2018-04-22 5:52 pm

Bytecoin Review - Cryptocurrency Guide

Bytecoin is the first type of cryptocurrency which ensures that secure CryptoNote protocol can be used for the security of users. It provides 100% untraceable transactions with the help of ring signatures and stealth addresses. However, the algorithm of Bytecon which is known as CryptoNight was created by BCN developers in collaboration with CryptoNote team.

Read more...

Leave a Reply

Your email address will not be published. Required fields are marked *

*

Economic Calendar

Powered by Myfxbook.com

The information contained in this website is for general information purposes only. This information is not an alternative to investment advice. Financial instrument and investment options are highly complex instruments, any potential client needs to study and fully understand the risk and financial implication before he engages or stars using any of those. We encourage searching for private and expert financial advice and getting sufficient knowledge before you start trading and every time you consider any financial instrument. Statrader.com is not licensed nor authorized to provide investment advice or investment services. Statrader.com does not promote, advice, or make any personal recommendation to clients to trade binary options nor to hire or work with any binary trade broker. This website is independent of binary broker featured on it. Before any client star trading or use any broker service, he must do his own investigation about broker legal license, registration and government authorization to ensure his suitability, and client must completely understand all the risks involve with any financial instrument and/or trading options or opportunities before he even considers start trading. The information is provided by Statrader.com, we make no representations of warranties of any kind, express or implied about the accuracy, reliability, suitability with respect to the website. Any reliance you place on such information is therefore strictly at your own risk. This Statrader.com has financial has financial relationships with some of the product you see on this website. Strader.com may be compensated every time a potential client click any of those links and/or open an account of hiring any of the services offered by third parties. Binary options trading entail a high risk for all potential clients to lose all of their invested money.

Copyright © 2017 · statader.com

Recommended Crypto Exchange for Beginners
bitbay banner
Popup