Thread: Leverage

Hi
I am new to forex and have opened a demo account.
I have searched the web trying to find how much leverage to use, but can't find anything useful.
Is a low leverage the best to use? Are there any leverage calculations to find the best to use? Or is there a recommended leverage that people use?
How would you know which one to use?

If you use a low leverage you you will make small losses and small gains. If you use a high leverage you can make big gains and big losses. If you are going to invest $100 - 1000 and you use a high leverage it is very easy to wipe your account out in no time at all. You should only use a high leverage if you really know what you are doing and are very confident that the trade is going to go your way. If you use a broker like etoro or easy forex they have tools that show you what trades are being placed by other traders and by how much percent. These are great tools to get an understanding of when to place trades.

Originally Posted by ILMJ

Hi
I am new to forex and have opened a demo account.
I have searched the web trying to find how much leverage to use, but can't find anything useful.
Is a low leverage the best to use? Are there any leverage calculations to find the best to use? Or is there a recommended leverage that people use?
How would you know which one to use?

Leveraging is a double edge sword, you can make a kill or you can be kill. Now your account size and plan your money management wisely in order to survive ad prosper in forex trading.

Leverage involves borrowing a certain amount of the money needed to invest in something. In the case of forex, that money is usually borrowed from a broker. Forex trading does offer high leverage in the sense that for an initial margin requirement, a trader can build up - and control - a huge amount of money

Originally Posted by musihaFX

Leveraging is a double edge sword, you can make a kill or you can be kill. Now your account size and plan your money management wisely in order to survive ad prosper in forex trading.

It's true that leverage is a double edged sword. Maybe the best thing for a beginner is practicing with a demo account for a while before opening a live forex trading account.

Hi ILMJ.
You raise a very good point: Using leverage is a complex thing and unfortunately there are no definitive answers. When starting out as a beginner, its better to not start high and far beyond 10 times the amount of investment. As you progress though, it is more do-able to leverage your money. It is important however to note that the leverage effect is not the most important factor when it comes to trading; the most important thing for a trader is self-discipline that should be expressed through the use of stop loss is not more than 2% of the total position. This will ensure you a long trade, where you can learn more leverage in the future.
Good Luck and Happy Trading! James

Originally Posted by ILMJ

Is a low leverage the best to use? Are there any leverage calculations to find the best to use? Or is there a recommended leverage that people use?
How would you know which one to use?

Hi ILMJ and welcome to the wonderful world of forex trading (atleast most of the time it is ) Unfortunately, there is no absolute answer for your question. I recommend for beginners and experience traders to trade with small leverage. I would start with 1:5 max and when you feel more secure, you can use leverage of 1:10, which is quite risky.
Hope you find this helpful.
Good Luck and Good Trade

leverage is a general term for any technique to multiply gains and losses. Common ways to attain leverage are borrowing money, buying fixed assets and using derivatives.