When you are new to Forex it is easy to assume that the more leverage the more money you make. The truth is the more leverage is the more you will lose your money. This is a hard lesson for many traders and why many leave thinking there is no money in Forex whatsoever, the truth is there is more money Forex than any other business out there. How to get it and how much to risk is the key to anyone’s overall success..
First of all, we all know forex is emotional, losing money just sucks. However you need to ask yourself what is you risk, how long do you hold onto a trade and how much are you investing..?Each factor affecting the amount you earn or the amount you lose..
Let me show you a formula that works and when is only the time to risk more..
How Much Leverage in Forex is the Best?
First of all the key question of all, let me answer it.. If you hardly ever want to lose a trade then the best leverage is times 10 or less. Why times ten..? Well because loss is small and gain is small which allows a trader to use patience as leverage more so than money..
A great example of a low leverage trade is this.
$1000 dollar trade x 10 which means $10,000 units.. Sell in safe sell zones by the daily chart and buy in safe buy zones by the daily chart of the currency you like.. This example gives the trader around 1 dollar per pip, so from a 50 to 60 pip profit trade that means the trader makes over 50 dollars profit.. If however the trade goes against you then hold until you feel you have lost enough and then close, if you feel it will turn around a few days later or a week later hold until it does.
This allows for up to 10 cents in movement overall..
Still Trade Good..
Please be aware that by trading with this low risk leverage level does not ensure 100% success, you still will want to buy at good lows and sell at good highs.. You still have to trade within the common success guidelines, however what it favors is more time to to the trader which allows them to be a lot more successful..
With this formula and some well placed trades it is not uncommon to earning more than 200 to 300 a day if not more.. Your amount depends on your level of trading, i always recommend practicing first before going strong or making it your business.
One such good Forex broker for this level of level of low risk leverage is Etoro, who allow multiple settings of risk depending on your account, while at the same time allowing you to learn from many other top traders doing the same as you as well..
Why High Leverage Makes a Trader Lose?
The main reason high leverage makes a trader lose is because it goes against you when the market goes against your judgement, no one trader can be right each trade, however by risking low leverage they can hold where other traders that do high risk cannot so over time a low risk trader makes a more substantial income than those risking it all.. Not only that it is not uncommon for a high leverage trader to lose there account, while low leverage allows more time to assess money management which in turn produces more profits overall..