It's not about leverage it's about risk, a concept which bozos like TraderZones and crgarcia can't seem to grasp
The absolute foolishness of some traders is astonishing I don't even want my funds at any broker or bucketshop that allows this, even for short bursts. They sit there debating 100:1? 400:1? 100:1 leverage is like playing Russian Roulette with 4 bullets in 6 chambers. You just might get away with it for a short time. But then the market will jump or tank unexpectedly, and you will be sitting there with large losses, margin calls, or bankruptcy...
Haha I said yesterday at the office that the guys who risk alot to make a little (high leverage can make you trade this way). Russian roulette feels fine fun until ... SPLAT!
lol, some of you people don't seem to have the sense God gave a sack of beans! It's expected from the likes of TraderZones, he's been spouting garbage for years and I doubt that will change, but I thought some of you others had more about you than that. Leverage used means diddly, it's RISK which matters, that's the important number. If you're unable to differentiate between the two then seriously you must be learning impaired or something, and most definitely in the wrong business. If you guys are the average wannabe trader then it's no wonder they say 90% lose money in this game :eek:
It always appear that people who advocate limiting leverage or all the blah blah do not seem to have much control over their positions, or a lack of planning. The so called "limiting" leverage sounds more like hedging ignorance.
When calculating risk, you have to take the worst case. The worst case is a market gap against you. Say it gaps 100pips against you. It doesn't matter if your stop is -5pips or -50pips, you get filled at -100pips. There's a reason why brokers don't base margin calculations on where your stops are. They know stops mean diddly when it comes to real risk. I like to move my stops to b/e as soon as I can which makes the risk calculation very simple. Since fx is a very liquid market, I assume maximum gap is a 1% move (I don't hold over the weekend), so my risk on a b/e position is 1% x leverage. I don't want to risk more then 50% of my account on such an event so I would use a maximum of 50x leverage. I'm not saying it's wrong to use higher leverage than that. Different traders may use different assumptions in their risk estimation. Risk is the number that matters, but it is closely related to leverage and if you are using high leverage, you need to be sure you have calculated your risk.
Any FX broker that advertises in a big way, seems to do it with emphasis on their available leverage. I think a beginner mindset is easily swayed by 400:1 claims. When a new guy sees that number, they think, "wow, I can make 400 times my investment". They may be right or wrong, but that's the hook. I may be undersestimating base intelligence, but clearly many brokers use this tactic.
lol, if that's seriously what they think then they really have no place in this business! Like I've said before, leverage and compounding are extremely powerful tools, but like a loaded gun if the user doesn't know which is the dangerous end he's in danger of shooting himself in the foot! The leverage available, and the liquidity to go with it, are two of the main benefits of forex and offer every opportunity for aggressive compounding. By all means limit your profit potential by setting a mandatory limit on the amount of leverage you use, but also understand that there are people taking full advantage of what this market and the marketmakers are offering.