Leverage on managed account

[bheurekso]

Bank Trader originally post:
Your monthly target should be no greater than 7%.

Glad to find this thread, my monthly target is/was set at 20% (1% daily average target)

I manage to gain 13.09% in July, and 19.78% in august. I was using 10-1 leverage though.

Add my fund along with my first investor's at the end of august, so far manage to pocket 1.71% in september.

I don't think I've used leveraging at it's best, because I trade more money now, and I had to reduce the leverage down to 5-1 for september -due to psychological reason. wrong concept?

Bank Trader originally post:
Put up a month or two of 4-7% returns and we'll talk later.

Perhaps we can talk now? to fix what i've been doing wrong? and how to implement leveraging properly to maximize the return?

your advice highly appreciated, Thanks.

[kaar4]

I disagree with not using a high leverage. A lot of people have limited funds say around $1000 or less to start trading.
With a 400-1 leverage it would take $25.00 to purchase aprox. 10000 units making each pip worth $1.00 leaving $975.00 or a 975 pip loss to be stopped out.
Unless your totally brain dead it is unlikely that anyone will lose all there money on there first trade.
Versus the same $1000 with 20-1 leverage which would take $500 to purchase 10000 units allowing you to lose 500 pips or $500 to be stopped out.
Am i missing something on these figures?

[TRADERguy]

Originally posted by Gamma Jammer



As far as I know CMC lets you pick exact trade sizes down to individual dollar amounts.

CMC Forex will let you trade any amount 10,000 or bigger.

Cheers,

TRADERguy

[TRADERguy]

Originally posted by kaar4
I disagree with not using a high leverage. A lot of people have limited funds say around $1000 or less to start trading.
With a 400-1 leverage it would take $25.00 to purchase aprox. 10000 units making each pip worth $1.00 leaving $975.00 or a 975 pip loss to be stopped out.
Unless your totally brain dead it is unlikely that anyone will lose all there money on there first trade.
Versus the same $1000 with 20-1 leverage which would take $500 to purchase 10000 units allowing you to lose 500 pips or $500 to be stopped out.
Am i missing something on these figures?

Yes you’re missing something. Leverage is a function of your position size vs. your account size. A 1 mini lot position (10,000) with an account of 1,000 is 10 to 1 leverage.

Cheers,

TRADERguy

[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.

[psperos]

If anyone wants to take trading/investing Forex seriously, then you must employ low leverage for proper money management. You got to think why 90% of traders get blown out, and leverage is why. There are a lot of people, funds, etc making a lot of money in forex trading. I can assure you the groups making money and have been around for a while are not using high leverage.

I agree, with small accounts around 1000, you will be forced at 10/1, and it might be worth the risk to leverage a little higher because you are just risking 1000 or so.. that's different. I have praded 20/1 witha 1000 account with no problems.

But,

When dealing with clients, and trying to trade as an investor, not as a income/getrichfast trader : the whole game changes.

I use leverage as a tool. One client of mine has an account of 15000. I leverage 2/1 trading 30k units, sometimes 40k units. I trade with $1000 of the $15000 and keep 14000 in a reserve account. This is taking advantage of leverage because i am not putting 100% of his money on the table to make these trades. If something happens, and the account gets low, i trasfer more money to the account and move on.

My trading is less stressful, thus impacting my results positively.

BTW the guy looking for 20% a moth using 10-1.. you will get blow out eventually. Eventually you will loose X% in one day that will be an unacceptable amount in the eyes of any type of investor. If you have to lower leverage for psycological reasons, then you were never using the right amount in the first place. Trade safe. i know it feels good now, but the day will come when you wish you did, trust me! having blown my account atleast 4 times when i first started... lets just say i have been through it and learned for experience. You got to have patience.

[bheurekso]

If you have to lower leverage for psycological reasons, then you were never using the right amount in the first place.

How to determine the right amount to use? what consideration(s) should be taken into account?

[psperos]

Originally posted by bheurekso



How to determine the right amount to use? what consideration(s) should be taken into account?

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.