Less leverage = More profit

Discussion in 'Psychology' started by Gcapman, Apr 28, 2010.

  1. Gcapman


    Anyone else realize that they make more money when they use leverage?

    I am able to stay in positions longer and when trades do go against me, it's all good because it doesn't hurt as much

    In summary, the less leverage I use, the less emotional I am.....
  2. yes and no.
    you should be able to make as much money, with the same amount of risk relative to your return, with less leverage as with more. your strategy and discipline should be the same regardless. it is all just a matter of numbers and psychology.

  3. You'll have to ask the Market that question. The Market knows....
  4. Psychology is affected by leverage.

    Two tightrope walkers with equal experience and same rope length. One walks across the grand canyon, the other a few feet above the ground.

    Who is more likely to choke first?
  5. Kap


    1 cent per tick move, and a lot would find this trading lark a lot easier.. 100% psychological for the over leveraged / undercapitalised herd.
  6. choke on what?
    are they eating at the same time?
    i thought we were talking about trading.

    neither or both or one or the other.
    if they have the same level of experience, the height at which they are suspended is irrelevant.
  7. Leverage is a tool.

    Like a hammer, you can drive nails or..............smash your finger.

    If you're over-trading, taking on sub-optimal positions, then leverage is probably not the best of ideas.

    Constraining yourself to cash will force you to be more selective and paitient.
  8. Personally, I fail to see the attraction of staying in losing trades longer. I think it's somewhat indulgent. Being able to stay longer in an underleveraged trade (because it doesn't hurt as much when it goes against you) is offset by the lower potential of the trade due to the reduced leverage.

    Not that I am a proponent of overleveraging. Just that I think the glamour of remaining in a losing trade wears off fairly quickly. And so, I generally refrain from finding reasons to prolong my stay in losing trades. And I certainly don't want to get more comfortable when I am in them.
  9. i disagree insofar that diversification is part or risk management, and in prop trading at 20-40:1 or whatever you're at, you have to be broken up into multiple positions, long and short, with some cash reserved (10-20% is my usualy limit, why let it sit there doing nothing when the market moves?) to get yourself out of a bad trade quickly.

    i do not agree that more leverage=more risk. if it is, then you need to improve your risk management techniques and work on your psychology.
  10. neither do i.
    get in, out, take profits, cut losses. letting profits or losses ride in intraday trading is a recipe for disaster in the making in the long run, blowup imminent from a lack of discipline when the shit hits the fan.
    #10     Apr 29, 2010