How To Use Leverage In Your Trading?
Using leverage isn't bad as long as you know what you're doing.
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We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://bit.ly/2HFykNd
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So obviously, leverage is one of the most important factors we need to understand as it relates back to our overall risk management. And without using leverage correctly, it can be enough to sink even the most successful traders out there.
So it's not only about being able to find high probability trading opportunities with your fundamental analysis, but it's also about being able to keep that money, right?
Being able to capitalize on those high quality no-brainer trades and being able to manage your risks successfully. Now, something that we always advise traders to do, especially if they are new to trading, is to trade without using any leverage. So that means trading at a one to one leverage.
Now that does not mean that you need to have a trading account that only allows one to one leverage because not many brokers will allow you to basically cap your account to such a low leverage.
So you can have an account with any leverage, 100 to one, 400 to one, whatever. It doesn't really matter. What matters is how much you risk when you actually do your position sizing on that account. So you can choose to trade one to one leverage while having an account that allows you to trade 1,000 to one, just as an example.
So the only thing we mean with trading without leverage is that you're only trading with what you can afford to trade with. So if you're trading without leverage, it means that you can only risk or trade a micro lot for every $1,000 in your account. That means you can only trade a mini lot for every $10,000 in your account and you can only trade standard lots for every $100,000 in your account. So that way, you're always keeping your risk manageable and of course keeping your risk low. Now keep in mind this is a good approach for dollar based major currency pairs as that would mean that you're risking about 1% of your account for every 100 pips moves. But a very important point to keep in mind always when you're trading is volatility.
So volatility is different across currencies. It's different across asset classes. So if you want to get really granular with your risk, you will want to consider beta adjusting or volatility adjusting your position sizes. So that means you're always using lower leverage on any particular trade and you're keeping that volatility in mind.
So what professional traders do is they keep their leverage low on the more common type of trades, but they then add leverage to those really clear and great high quality opportunities.
And that's how they usually grow their accounts a lot faster than novice traders by even keeping their leverage very low. So that's just a couple of tips, couple of reminders on how we use leverage. Any other questions on the subject, please make sure to let us know.
***For more detail watch the video above or visit www.forexsource.co
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If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://bit.ly/2HFykNd
-----
So obviously, leverage is one of the most important factors we need to understand as it relates back to our overall risk management. And without using leverage correctly, it can be enough to sink even the most successful traders out there.
So it's not only about being able to find high probability trading opportunities with your fundamental analysis, but it's also about being able to keep that money, right?
Being able to capitalize on those high quality no-brainer trades and being able to manage your risks successfully. Now, something that we always advise traders to do, especially if they are new to trading, is to trade without using any leverage. So that means trading at a one to one leverage.
Now that does not mean that you need to have a trading account that only allows one to one leverage because not many brokers will allow you to basically cap your account to such a low leverage.
So you can have an account with any leverage, 100 to one, 400 to one, whatever. It doesn't really matter. What matters is how much you risk when you actually do your position sizing on that account. So you can choose to trade one to one leverage while having an account that allows you to trade 1,000 to one, just as an example.
So the only thing we mean with trading without leverage is that you're only trading with what you can afford to trade with. So if you're trading without leverage, it means that you can only risk or trade a micro lot for every $1,000 in your account. That means you can only trade a mini lot for every $10,000 in your account and you can only trade standard lots for every $100,000 in your account. So that way, you're always keeping your risk manageable and of course keeping your risk low. Now keep in mind this is a good approach for dollar based major currency pairs as that would mean that you're risking about 1% of your account for every 100 pips moves. But a very important point to keep in mind always when you're trading is volatility.
So volatility is different across currencies. It's different across asset classes. So if you want to get really granular with your risk, you will want to consider beta adjusting or volatility adjusting your position sizes. So that means you're always using lower leverage on any particular trade and you're keeping that volatility in mind.
So what professional traders do is they keep their leverage low on the more common type of trades, but they then add leverage to those really clear and great high quality opportunities.
And that's how they usually grow their accounts a lot faster than novice traders by even keeping their leverage very low. So that's just a couple of tips, couple of reminders on how we use leverage. Any other questions on the subject, please make sure to let us know.
***For more detail watch the video above or visit www.forexsource.co
-----
If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
