Much of the time stupidity can substitute for guts and nerve. There is no need to make your fortune in a single play or even in a single year. I'm a big fan of leverage but to push it to the max 200:1, 400:1 etc. is generally a suicidal way to manage risk. If your methodology is sound you can make somewhat less and then rinse and repeat. There really is no need to shoot for the moon.
Not quite. We are only talking about pyramiding a winning position here. In other words we bet big but only with the house's money, not with our hard earned money (starting capital). Just one or two good mega trades like that, at 400:1 leverage, and you are set for life...
I have no quibble with pressing bets if that is your style/plan ... more power to you. But "the house's money'? That is a foreign concept to me. Once I am in the green it is my money if I choose to close the trade. The "house money" concept does not compute for me. Some years ago five of us provided a round of equity financing for a company that was about to go public through, what at that time, was known as a Regulation A Offering. The offering was completed and sometime later they asked us -- the same group of five friends -- to provide a round of finanancing to a subsidiary. They pitched it as "playing with the houses money" as the amount they sought was exactly the same as our profit had been on the parent. The other four guys went with it and I declined. They lost it all. It was my money and I treated it that way.
High leverage (200:1) is good for small accounts. Say you have a $200 account and want to make a quick $70 overnight... in many ways taking large bets with a small account is better than taking small bets with a large account.
right.. nerves of pure steel and no emotion allowed. i was almost there pyramiding into the usd/yen breakout, realisticly doubeling up 2 times with 300 k starter position if i just had followed my plan to add on dips and breakouts .. 1.2 M position .. but my emotions destroyed it .. the equity swings were too extreme, so i got out too early
That kind of leverage is suitable only for HFT or very short term trading (< 15 minutes). So the big bets are OK as long as the risk is quite defined and capped by the time-frame to some degree. Holding overnight with that kind of leverage is definitely suicide. Of course, you could always get lucky.
Some US futures brokers with low intraday margins are effectively giving you 100:1 - 350:1, depending on margin and contract. I recall seeing $500 margins once, which would be ~340:1 intraday on the EuroFX contract.
Publicly available stats indicating 75% annual basis, new mkt participants, failure rate in stocks, vs 90-95% in futures vs over 98% in forex suggest direct correlation with leverage. Mainly a psy. factor. At 400:1, position can show change of hundreds of percentage points in a matter of hours. How does one deal with that in directional trading? You scalp, you need stops but will get whipped by most insignificant stops run. You remove physical stops and sometimes impulse won't retrace... You go for multi days moves and you still need to manage position continously to try be on the right side, at the right time and with appropriate size for that 1000% move while allowing for complete scenario failure... In between maybe hourly plays with tightish stops... ...Then a couple of hours of blind obstinacy and the account is gone LOL - ras72