Guide to Leverage
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On the surface, leveraging looks like a good idea. Most brokers will allow you to borrow from them to make a trade, usually with a small percentage down. Leverage has nothing to do with changing your chances of a successful trade, it just means you are able to invest more into it then what is in your Forex account. Forex trading is measured in pips, which are actually fractions of a cent. In some cases, a gain of pips may only equal one online trading without leverage.
For some traders, such a small return on their investment is disappointing. By increasing the amount of money they put into the trade, they are increasing the amount of profit they could gain.
This will allow for them to quickly augment their Forex account. By now, the answer to that question should be clear. Not every trade is going to go the way you expect it to, and if you borrow more than you can lose you could end up not only depleting your account, but owing money on top of that.
I have seen dozens of young traders who are looking to turn into millionaires overnight make this mistake. Instead of making clear cut plans and using risk management skills, they try to rely on online trading without leverage large amounts of money at one time. I have seen this method fail more times than I care to remember. It is important that you remember that the money you are using when leveraging a trade is not Monopoly money.
This is what those young traders who lose everything fail to understand. If he were to leverage his 50 times while you stayed at a prudent 5 times his risk is almost twice as much as yours. Of course, had things gone the other way, your friend would have gained a substantial amount more than you, but with Forex trading earning is not about speed, it is about patience.
It is easier to manage your risk online trading without leverage reward ratio during these times, making the probability of coming out ahead higher.
During volatile times it is best to use leverage sparingly. As mentioned earlier, pips are merely fractions of a dollar. For some that type of small return can be frustrating. You should not let that deter you. Unlike stock market trading or real estate investing, FX trades are fast moving, and around the clock.
This allows you to always have your money out there earning profits for you. If you have a difficult time with trading small, think of your wins in terms of percentages, not pips or dollars and cents. This will help you to see how quickly your account is growing from an unbiased point of view. You must have patience with trading currencies in order to be successful at it. While the thought of leveraging your trades and potentially increasing your profits may seem appealing, a new trader should test those waters very slowly.
I have seen firsthand traders who online trading without leverage unnecessary risks because to them, that loan being offered by the broker is intangible money. Play it safe, take online trading without leverage slow and steer clear of leveraging if you have plans of making a fortune by FX trading. Online trading without leverage Stubbs is the founder of WinnersEdgeTrading.
Winners Edge Trading has trained thousands online trading without leverage people to trade the Forex markets. That is a great point about leverage, getting control online trading without leverage our minds is critical, and also having our minds direct our actions to be in line with our plans is one of the most difficult parts of trading.
I always look at leverage as a tool, its not good nor bad it is just a tool and how we use is what matters. Leverage is not bad thing by itself. It is bad because of it's huge impact on your psychology. If you can trade profitably with a small amount of money, it does not mean that you will be able to do this with large. If you would like to become a good trader, it is not enough to study the technical and fundamental analyses only.
You need also psychological preparation. However, a psychological preparation is the hardest part of your study, because it will comes to you only with your experience.