Traders Must Be Aware Of The Dangers In Forex Leverage

Traders Must Be Aware Of The Dangers In Forex Leverage

In the margin trading that we do on the forex market, forex leverage actually doesn’t really affect the amount of profit or loss we experience. However, there are many traders who still refer to leverage as a double-edged sword. The dangerous type of leverage is the forex leverage used by traders who do not understand the concept of good money management. If you worry about this, but you simply want some help from professionals to handle this, you can go to http://www.cnie.org/highleverage/forex-brokers.html and hire some of the best forex brokers with high leverage.

What are the other disadvantages of choosing large forex leverage? It’s Margin Call. Margin Call with a level of 100%, will occur when the equity we have is the same as the forex margin required to open the position. If you choose 1: 3000 leverage and you open just one lot, you will only be exposed to a Margin Call when your balance is only 33 USD, whereas if you choose forex leverage of 1: 100, you have been exposed to a Margin Call since your balance is only 1,000 USD. Between the two, using 1: 100 leverage is certainly safer because you can have 1000 USD left over, much more than 33 USD.

This makes leverage becomes a double-edged sword. On the one hand, it is able to make you gain more profits, on the other hand, it is also able to erode your funds instantly. If you already know and master the principles of good money management, then whatever forex leverage is used, it shouldn’t be a problem for you.

If we talk in the context of professional traders, they usually choose maximum leverage of 1: 100. It’s small, isn’t it? Forex leverage can give us a huge trading advantage, but it can also come back against us as traders.

This is what professional traders try to avoid. Therefore, in addition to limiting the use of good money management, they will also limit their behavior by limiting the use of the forex margin. With small forex leverage, the margin required to open a position will be of considerable value. This will not provoke them to overlot, because the amount of available forex margin is already limited.

Leave a Reply

Your email address will not be published. Required fields are marked *