Leverage on managed account

[bheurekso]

Thank you psperos now I'm glad to know that we are in the same idea.

Nonetheless I'm still puzzled with Bank Trader's idea on how to utilize leverage to imize return. I don't think he/she means simply by increasing leverage being used.

[TRADERguy]

Originally posted by kaar4
Traderguy
If you use the whole $1000 to purchase a mini of 10000 the leverage is 10:1 but at 400:1( your $1 to buy 400 units) 10000 units will take $25 of your margin because that is exactly what I am doing on CMS. If I increase it to 1 lot 100000 units it will take $250 of my margin.

You are missing my point. If you trade 1 mini lot (10000) with a $1000 account your leverage is 10 to 1 period. The leverage of your trade has nothing to do with the imum leverage your broker allows nor does the $ amount that your broker requires you to put up for margin effect your leverage. For this example it will be 10 to 1 whether your broker allows 400:1 has you put up $25 or if they require you to put up $100 because they allow a leverage of 100:1. The leverage you decide to use during a trade the margin your broker requires are two completely different concepts.

Cheers

TRADERguy

P.S. I know that technically it's only 10 to 1 if your mini lot is in $ for a $ denominated account but that seems a little advanced to bring in to this discussion.

[Bank Trader]

Its great to produce high returns as long as you don't swing back forth. Setting high goals also leaves room for larger losses. Its ok to produce high returns but not to plan on them or to target them. Plan conservatively with your target return draw down to be in the 3-7% window. If your returns end up greater than that fantastic but don't let your drawdawns go up as well.

If you put on a trade you think the proper stop loss for that position is very close you can leverage your position more.

In proprietary trading there are a few rules.

1. Isolate the trade....what are you looking for (target take profit)
where are you wrong (firm stop loss)
how much do you want to risk on the trade

These 3 questions will let you determine your position size.

[James]

Hi Bank Trader

What bank do you work for in what capacity?

I am assuming your name is a clue.

[Bank Trader]

I work for a investment bank in NYC I run the FX proprietary trading desk here.

[falcon]

Hi Bank Trader

What trading variables would suit an account size of 150K with 7% monthly target?

In addition what if I lower the target to about 3%?

Any guidance would be much appreciated

[Bank Trader]

7% of 150k = 10500 monthly target

divided by 20 trading days = 525 USD a day.....

drawdown for the month should be 6800
drawdown for the day should be 1050

for 3% just cut it in half

[James]

525 a day does not help...that much is obvious.

7% per month simply means 700 pips unleveraged 350 pips at 2:1 or 233 pips at 3:1

Depends on your trading ability but I would suggest that 350 pips is achievable for some people but not easy. Rather 233 pips at 3:1 leverage is probably about right.

Each trade should therefore be 4.5 contracts (100k per contract)

Stops should be considered as well. Every 10 pips you risk at 3:1 leverage is 0.3% If you want to risk less than 2% per trade you will keep your stops less than 67 pips. This is also not easy unless you are a scalper.

If you can make 350 pips a month rather use 2:1 leverage stops at 100 pips (2%) This would make each trade 3 contracts (3 x 100k).

Hope this helps