Will you still trade if If there is no leverage in Forex ?

Discussion in 'Trading' started by angelnish, Jul 6, 2012.

  1. Assuming there is no opportunity of using leverage in Forex meaning you can only trade with amount you've in your account and no leverage to increase your trade volume- will you still trade Forex considering the risk yet no leverage to give big profit on small investment
    What you think is it more profitable or not?
  2. Most actual (not speculative) transactions in the fx market are spot with 1:1 leverage. I have been trading spot forex for 25 years with 1:1 leverage. It is rather simple. if you have above a certain amount in a bank you can get dealing prices to convert it to any currency you want. In this way you can hedge future proceeds in foreign currency, speculate without the risk of leverage, etc.

    I think the market would get healthier, more beneficial and attractive if people with $100 accounts and leverage 400:1 go away and look for their fortunes in lottery tickets or somewhere else. They form the base upon which the market is corrupted and hurts serious traders. When you see sports betting companies entering this market somthing must be done.

    The answer to your question is that small time gamblers will not trade without leverage but the market will get inflow of big money should the leverage stops.
  3. I don't trade FX, but the answer to your question is that leverage neither increases nor reduces your chances for profits. The amount of leverage you use is a personal preference - you increase or decrease the leverage until you can sleep comfortably at night with whatever position you have or with whatever losses you had that day. If the losses hurt you a lot and cause you too much emotional pain and anguish, you reduce the leverage. You can even reduce it below 1:1, i.e. trade less than the amount of cash in your account. Nothing wrong with that.

    Leverage can have a negative effect on your profitability in the following way. If you have too much, losses will cause you too much pain and your brain will start to react in an irrational way. You will start to feel regret that you did this or that trade, basically anything you do will make you feel bad, even a profitable trade (because you could have made a lot more money if you held on to it for example). Once you start acting irrational, you start sliding down the edge - a small mistake will lead to a bigger mistake, you will start disregarding stops, trading strategy etc. You will start doing things you wouldn't normally do. And your account will suffer. Again the reason is not directly the leverage, but your emotional response to the consequences of your own decisions.

    One benefit of using less leverage, is that you will have more time to learn. Imagine you are driving a car. Do you want to start driving as fast as you can, or you want to drive slow enough so you get more and more situations and experience. Of course you don't want to drive too slow, or you don't get anywhere, but just fast enough so you can learn.

    Sorry, if you were looking for a different answer. Hope this helps.
  4. as neutrino describes it, leverage is a two sided sword, used to cut, or, be cut by

    in any case there's the futures market and these days an account can be opened with
    $500 and the M6E - micro Euro FX $12,500 contract can be daytraded for $100 or
    $270 overnight, lower than the margin required to trade spot
    the 6E Euro FX contract is $125,000 and requires $500 to daytrade and overnight fee
    is currently $4,725 . there are tho far fewer currency contracts available to trade than
    spot offers and futures contracts are fixed amounts. see AMP and other brokers: http://www.ampfutures.com/

    high leverage definitely attracted a Lot of people to trade, perhaps I should say, to try
    and trade fx; people who had absolutely no prior trading experience and no idea what
    trading involved, or how difficult it is to Become a successful trader
    many fx brokers have now gone a long way to provide information such as forums and
    daily letters, trade recommendations on their sites with the intent of trying to educate
    would-be newbie traders
    because leverage was/is a problem, the US and Canada reduced the max leverage to
    50:1 , and regulations in some jurisdictions prevent opening an overseas fx account, so
    500:1 leverage is no longer available to most North Americans

    stock trading is 1:1 and there are many very profitable traders who trade stocks
    the introduction of fx trading - a child of the pc and internet changed the broker industry
    or at least decided some brokers to lower the amount of their account minimums in order
    to attract clients, individual online and usually from-home traders
    there are still brokers who require multi thousands of $ minimums in order to open an
    account and 'full service' brokers who charge $80 rt commission to trade one futures
    contract, vs the less than $5 'discount brokers' charge, as well most brokers these days
    provide a free charting/order entry program with data feed, another original that fx brokers
    introduced to the broker industry

    bottom line is that it's not leverage that makes a trader successful