Hello Trader community,
a statement that I ask again and again for several month, because in the forums it is very often written by a higher risk of leveraged investment products.
I just trade Forex in my feetime, only for pleasure.
Making it distinct, should I use a leverage of 100 or 400, the difference is apparent for me:
When I have a trade, 1 lot of EUR/USD using a leverage of 400, I must give a lesser amount of margin to my broker since I would using a leverage of 100.
The margin I get back from by broker, should I use stop loss limitations.
So I can calculate or determine my risk with my margin necessity as a basis.
Or in other words:
if a EUR/USD exchange brings me 50 pips, volume of 1 lot, I've a profit of $500
if I'm using a leverage of 1 or 400, my profit is always 50 pips/$500
or the trade should be stopped out by my SL (eg. RRR = 1), which means I've minus of 50 pips/minus $500.
If I'm acting with a leverage of 1 or of 400.
Can someone explain this panic-thought in public space?
So why a higher leverage should be a higher risk? (Im talking about total risk rather than relative risk)
greetings,.
(in your replies please do always use examples using a lotsize of 1)