Optimal leverage for a beginner in Forex or the stock exchange
One of the features of Forex trading is the use of leverage; it is this
aspect that allows you to get relatively high profits even with the slightest fluctuations in the exchange rate.
At the moment, most brokers provide leverage in the range from 1:1 to 1:500; there are companies in which the leverage can reach up to 1:3000.
Sometimes this fact attracts a lot of beginners who do not realize the harmfulness of trading with high leverage. The high risks are confirmed by the fact that in the United States it is prohibited to provide leverage of more than 1:50.
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 you to open a deal with a volume of 100,000, or one standard lot, with a deposit of $1,000.
If we discard the spread, the situation will look like this: by opening a position of 1 lot on the USDCAD currency pair, you are actually using the entire amount of leverage provided.
Since the base currency is the American dollar. In this case, the cost of one point with a volume of 100,000 will be $10, and this is with a deposit size of only $1,000.
Most brokers do not allow you to set a stop loss closer than 15 points to the current price, that is, the minimum loss will be 15% of the entire amount of your deposit.
And this despite the fact that most financial experts advise losing no more than 2-5% of the total deposit amount in one transaction. That is, from this example it follows that with a deposit of $1,000, it would be more rational to limit it to a size of 1:33 or volumes of only 0.3 lots.
At the same time, you should think that if you chose a leverage of 1:100 for a beginner when opening an account, this obliges you to trade in volumes of only 1 lot.
If you wish, you can open transactions with 0.1 lots. At the initial stages of trading, it is recommended to adhere to just such tactics, since there are a large number of unprofitable transactions that simply will not allow you to achieve a positive financial result.
And this will negatively affect your psychological mood. But what about getting extra profits in a short time, because some traders increase their deposit several times per day?
This fact also occurs, in this case a leverage of 1:200 or more is used, trading is carried out according to the so-called scalping strategy on Forex , which requires some trading experience.
Most professionals use this trading option only to accelerate their deposit . Trading with one volume and regularly withdrawing all the profits received, but as a result they still switch to quiet trading.
On my own behalf, I would recommend a leverage for a beginner on Forex of no more than 1:10, and for the stock exchange even less - 1:5. Only after you learn to control the situation and make successful trades with such leverage can you increase your leverage and try more risky strategies.
How to change the broker's leverage - https://time-forex.com/sovet/izmenit-kredit-plecho if you are not satisfied with its size