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Originally posted by bheurekso
How to determine the right amount to use? what consideration(s) should be taken into account?
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as far as how it feels.. You need to use the leverage to the point where you will make money, but at the same time you feel like you are not taking any risk for an average trade. You don't really want to feel the position when it heads the wrong way. The idea is to be where the least amount of stress is, but ofcourse... we need to make money too. you should beable to eaisly afford or absorb a 100 pip blowup in my opinion. And these 100 pips could happen over a series of 5 trades that lose 20 pips.
If you analyze a position you got to figure out how much you are willing to risk inorder for it to play out. When setting stops you have options. You could have a 2/1 trade that runs with a 50 pip stop. You could also run that same trade at 4/1 leverage with a 25 pip stop instead. The risk you take is having your stop taken out before moving in the direction you based the trade on. It depeds on the trade setup, how close you are to supports and resistances, but when you do the math the 4/1 trade makes you a lot more, but at the same time 25 pips in FX stop wiping is very common. Often trades still play out even after some supports and resistances we may think are significant are taken. In some trades, the more pips you can afford to risk for an idea the more of a chance you have at that play.
I think 2/1 leverage is a place to start, i even use 1/1. I have learned to be very patient. I would consider using more depending on the trade setup, and that all depends on you.