Optimal leverage for a beginner in forex or stock trading

One of the key features of Forex trading is the use of leverage, which allows for relatively high profits even with the slightest exchange rate fluctuations.

Currently, most brokers offer leverage ranging from 1:1 to 1:500, while some companies offer leverage as high as 1:3000.

This can sometimes attract a large number of beginners who are unaware of the dangers of trading with high leverage. The high risks are further confirmed by the fact that in the US, providing leverage greater than 1:50 is prohibited.

How does Forex leverage affect the trading process itself?

Let's look at this factor using a simple example: most beginners use a leverage of 1:100, which theoretically allows them to open a trade of 100,000, or one standard lot, with a $1,000 deposit.

Without the spread, the situation looks like this: by opening a 1-lot position on the USDCAD currency pair, you effectively use the entire amount of leverage provided. This is because the base currency is the US dollar.

The value of one pip with a volume of 100,000 will be $10, and this is with a deposit size of only $1,000.

Most brokers don't allow stop losses closer than 15 pips to the current price, meaning the minimum loss is 15% of your entire deposit. This is despite the fact that most financial experts advise losing no more than 2-5% of your total deposit in a single trade.

This example suggests that with a $1,000 deposit, it's more rational to limit your leverage to 1:33 or just 0.3 lots.

It's also worth considering that if you selected a beginner leverage of 1:100 when opening an account, this only forces you to trade 1 lot. You can open trades with 0.1 lots if you wish.

This approach is recommended in the initial stages of trading, as there are a large number of losing trades that will prevent you from achieving a positive financial result. This will negatively impact your mental state.

But what about achieving super profits in a short period of time? Some traders increase their deposits several times in a day?

This is also true. In this case, leverage of 1:200 or more is used, and trading is conducted using the so-called scalping strategy on Forex , which requires some trading experience.

Most professionals use this trading method solely to boost their deposits . They trade a single volume and regularly withdraw all profits, but ultimately switch to more sedentary trading.

Personally, I would recommend leverage for a Forex beginner of no more than 1:10, and even less for the stock market—1:5. Only after you've learned to control the situation and make successful trades with this leverage should you increase your leverage and try riskier strategies.

How to change your broker's leverage - https://time-forex.com/sovet/izmenit-kredit-plecho if you're not happy with it