High leverage -gt high risk: Please explain - Page 2
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Thread: High leverage -gt high risk: Please explain

  1. #11
    Quote Originally Posted by ;
    Can somebody explain this panic-thought in public space?

    So why a greater leverage must be a greater risk? (Im talking about absolute risk rather than relative risk)

    greetings, forexmaster.
    (in your replies please do use examples using a lotsize of 1)
    it's simple. The greater leverage you utilize the more you're able to earn/loose with account equilibrium.
    For instance. With 1:50 you are able to manage to buy 1 lot - with 1:500 - 10 lots. If you buy only 1 lot it makes no difference if your leverage is 1:50 or 1:500, you'll loose same amount of money. But if you'll buy 10 lots, you loose/earn much more

    also - let's say you spent 100% of your balance.
    In 1:50 20 pips of complimentary will probably be approximately 7 percent of the balance
    at 1:500 20 pips will signify a reduction of about 70 percent - makes a difference - doesn't it?
    High leveraged accounts are not for fools, but a lot of fools utilize them.

    Personally I adhere to 1:50 and will opt for greater lev. Just because I'm curious

  2. #12
    Nice exp, and yes, higher leverage=more risk, constantly.
    This Is the Reason Why you Want to reconsider your account size, leverage and margin when opening positions

  3. #13
    Leverage is simply how a lot of your account is held by your broker for every transaction.

    Think about this as a buffer / escrow account between you and your broker.

    If you utilize 1:20 leverage and place a transaction, then you have to give a huge percentage of your account to the broker whilst that transaction is open. This is good since it means you can not go batshit mad and open dozens of trades, as currency is now held by your broker.

    If you utilize 1:500 then you only give a tiny percent of your account to your broker, so you can go full-tilt and open shit loads of trades with big lots....but beware, this is the way you may lose money fast.

    This is the reason why they provide enormous leverage to retail as they prey on your own feelings to pursue losses and add to losers etc, by compounding drawdown, until you know it....margin call land.

    There's nothing wrong with having big leverage if you understand the preceding; why not use borrowed cash payable from atmosphere, just don't load the boat with losses else your account will be wiped after the next market heartbeat.

  4. #14
    Quote Originally Posted by ;
    Can somebody explain this panic-thought in public area?

    in summary,
    higher leverage account permits you to buy more, a lot more to get less money but leaves space for your net lost.
    It also provide you chance to flip your account.

    In investment business, that is called HIGH RISK

    High leverage account opens the door to high risk invest, but the choice remains on your hand.

    So you're right,

    Risk wise, with correct risk management on every trade, say 2% account size on each SL order, 1:50 and 1:400 is really no difference IF TRADE STOPS OUT.

  5. #15
    Quote Originally Posted by ;
    You state in your post to only consult with a 1 lot size place. In regards to a 1 lot size place that the risk will be essentially the same because you are always using the lot size.

    I hope this helps answer your question.

    If anybody has anything to add or correct please do so.
    Well stated, and that's right, if you always care for the LOT SIZE based on you personally risk management, leverage does not make much difference so long as your free margin will have the ability to maintain your negative balance.

  6. #16
    Quote Originally Posted by ;

    and it is possible to lose more than your initial investment.

    Don't forget that brokers have automatic systems set up to force liquidation of your position prior to the leverage cause you to lose over 100 percent of your account, however you are still accountable in the event of a problem occurring during the liquidation procedure and your account goes into debit, thus the high risk of losing more than what you put into the account.

    This can't occur if you don't use leverage, as you can then just lose 100 percent...
    After I read your response article, from the announcements I selected out above, I am sorry to say that there might be errors inside your understanding towards leverage and margin call.

    Primarily, leverage would just introduce you to a greater risk since it lets you buy more. After your negative balance reaches margin leve, yes, borker will close your positions, but ALSO give back your margin cash to continue for the next trade.

    So that you will NEVER lose over your account since there'll be always margin call and after that you will have the margin cash from pervious trade to continue trading further on.

    Secondly, in this high risk FX organization, broker has to have the system to NEVER allow their investers to lose more than what they put in, right?

    That I am not sure which area you are coming from, however in US after I killed countless live and demo accounts through time, I think I know how leverage out of 400:1 to 50:1 (currently), margin, and margin call functions.

    But please pardon me for my own direct thoughts.

  7. #17
    Quote Originally Posted by ;
    Dear Forexmaster

    I'm new to this field. Could you please clear me exactly what using a leverage means in trading? I've seen this term before but not clear what it means!

    Thanking you in anticipation.
    Red Herring,

    Along with what Danny said,

    claims you are wating to spend in Share ABC together with HALF of your $100 total capital, $50, and you also want to choose from

    Broker A with 1:1 leverage
    Broker B with 1:10 leverage.

    Broker 1 with 1:1 leverage
    With broker B, depoist $100 at 1:1 leverage
    You may buy ONLY 1 share of Share ABC ($50 x 1 share= $50) at a price of $50 per share, which leaves you staying $50 available.

    Broker 2 with 1:10 leverage
    With broker B, depost $100 at 1:10 leverage
    Share A price reduced to 10 times bigger since 1:10 leverage, $5 per share, and you may buy 10 shares of Share ABC ($5 x 10 stocks = $50), and leave your $50 on hand, too.

    When discuss increase $1, you would received profit,
    Broker A, $1 x 1 share = $1
    Broker A, $1 x 5 discuss $5

    That is called the energy of leverage

    Here comes the tricky part in regards to Lose,

    Both broker will FORCE to shut your position as soon as your account lost the other $50 you had after setting down the initial $50 buying Chat A. This is called Margin Call. It's also very important to understand that after Margin Call, both brokers will give back the $50 you used to purchased Share ABC to continue to make investments. In this example, you will have complete $50 to commit the next one after you received the Margin Call from both brokers.

    And This is the way the calculation goes,

    Broker A with 1:1 leverage that you purcahsed 1 share of Share ABC from
    $50 / 1 Share = $50 points value of drop

    Broker B with 1:10 leverage that you purchased 10 shares of Discuss ABC from
    $50 / 10 stocks = $5 points value of drop

    In this case, Broker B expose you to a margin call 10 times quicker compare to Broker A.

    My choice on leverage is that it is a two-edage sword, and you need to use it sensibly.

    If we've missed anything, please point it out. Thanks.

  8. #18
    Quote Originally Posted by ;
    Leverage is simply how much of your account is held by your broker for each transaction.

    Think of it as a buffer / escrow account between you and your broker.

    Should you use 1:20 leverage and set a transaction, then you have to give a huge percentage of your account into the broker whilst that transaction is available. That is good since it means you can't go batshit crazy and open up dozens of trades, as money is currently held by your broker.

    Should you use 1:500 then you merely give a tiny percentage of your account for your broker, so it's possible to go full-tilt...
    directly on the bull's attention.

  9. #19
    My concept is choosing high leverage don't mean carrying risk. Leverage increases the capability of trading. Suppose I've got $1000 and I am using 1000:1 leverage so it is possible for me personally but 10 lot. So just 10 pips profit (except spread) will deliver your 10% profit that means $1000. However, if we think the negative side just 10 pips loss cause you to loss of your capital. You may face loss with less than 100 pips loss.
    But it is not essential that I am choosing the big leverage for its maximum usage. I think most important is just how much risk I am taking. If I take just risk using leverage and with sl it'll not be any problem whether I am using high leverage or not.
    So I always pick the maximum leverage and it is because sometime we receive really strong signal and I would like to maximize my profit that time.

  10. #20
    Each one the article above we we assembled. I simple would love to add one thing. .

    There is a massive difference to me between Your risk and what you are really risking.

    What it is that you are risking of course would be margin. The amount of money secured into a situation in order to keep it open.

    Your risk are your true exposure to the market. Including your sl, if you are vulnerable to revenge trading, and your system's truth.

    Most men and women frown upon having high leverage high equity as it might result in a quicker reduction of your account in contrast to using small number of funds.

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