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Leverage Isn’t a Bad Thing

Discussion in 'Forex Beginner Q&A' started by Currency Expert, Aug 5, 2015.

  1. Currency Expert

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    “The point [is] that a trader has to master their psychology to allow him or her to take many small losses, trade through drawdowns, and let winners run beyond expectations.”- Markham Gross


    Some people preach against leverage because of their own faults. They use trading methodologies that ultimately make average losses that are bigger than average profits, while they should be doing the opposite. While we may find it difficult at first (the same was true of me), controlling losses and making trading decisions become very easy when they become our nature.


    In order to know what leverage is in trading, plus the advantages in using it, please search for the information yourself. However, experienced traders should understand what leverage is. Leverage isn’t a bad thing- it’s irrational use of leverage that’s a bad thing.


    So I recommend the use of leverage. When leverage is used with strict money management, a heartwarming balance is then found between decent profits and risk control. For example, I use a leverage of 1:100. However, I risk only 0.25% per trades: which means that I use only 0.01 lots for a $2000-account, with a stop of 50 pips per trade. With an account that’s less than $2000, I’ll recommend conversion to cents, for greater safety.


    The greatest achievement in trading is controlling the treacherous statistics called drawdowns, not making profits, for profits are easy to make but difficult to retain. For example, if you made a profit of 10% in this month, you could start experiencing losses in the first and/or the second week of the next month (as it’s true of any trading approach you might adopt). A proof of your proficiency then lies in your ability to lose as little money as possible, going down by, say, 2% - 4% maximum. With this, it’s easier for you to bounce back when the strategy enters another encouraging winning streak. However, a bad trader would lose between 10% - 40% or even more, during such transitory losing streak. What’s the benefit of gaining 20% this month and losing 55% next month?


    It’s a good thing to help our friends and well-wishers to be the best they can be in their trading careers – hence my articles. Directly or indirectly, we benefit when our friends and acquaintances when they become successful. If your friend doesn’t become a king, you won’t become a friend of a king.


    The quote below ends this piece:


    “The problem is adjusting expectations so that your psyche survives long enough for you to be around when the big winner appears. The majority of traders quit simply because expectations and reality are out of alignment.”– Chris Tate



    Source: www.tallinex.com
     
  2. sininfinity

    sininfinity Active Member

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    Agree. Some try to show that because of leverage one looses money. If risk is maintained then leverage can not harm anybody.
     
  3. vic84

    vic84 New Member

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    Leverage is not bad , but one thing that you should keep in mind that, when you use leverage you should be very sure of your trade or else you have to pay a lot.
     
  4. penta

    penta New Member

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    High leverage is an essesstinal thing for scalper, who trade big volume usually.
     
  5. sininfinity

    sininfinity Active Member

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    One does not have to be very sure of trades. One has to have a good money management plan. That will ensure leverage is not going to harm his or her account balance because losses were taken in to account.
     
  6. tianxiabachang

    tianxiabachang New Member

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    Leverage is a double sword, could be very helpful to increase your profitable, but it will also cause heavy lost if you choose wrong leverage. Normally I think 1:100 is suitable for many traders.
     
  7. learn2share

    learn2share New Member

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    It replies on the volume you're trading, leverage is only a tool, if you don't know how to trade properly (good money management), 1:100 could also burn your account.
     
  8. sininfinity

    sininfinity Active Member

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    Very well said. At some point I also believed that leverage is a double edged sword. But now I don't believe in that anymore but I would like newbies to believe it. That way they can keep their balances a little bit longer.
     
  9. AwaberA

    AwaberA New Member

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    I have already traded with FreshForex for a long time and I liked it. There is no minimum deposit here, and you can choose different leverage. The highest is 1:1000, which allows to trade with big trading volume.
     
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