What is too high leverage in daytrading?

Have a question about trading? Any questions are welcome. Go ahead!

What is too high leverage in daytrading?

Postby Rom » Sun Mar 20, 2011 8:12 am

.
- if your leverage is too high you will fail

What max leverage in daytrading will be is a controversial question.

Here is my current answer. I don't recommend daytrading at all, I am just making a computation for those who prefer daytrading.

Upper limit: 1.4120
Median line: 1.4060
Lower limit: 1.4000

Worst case scenario
Entry1: 1.4060
Entry2: 1.4030
Entry3: 1.4000

Stop loss: 1.3970

With 3 contracts
Max drawdown: 25,00%
Use leverage: 19.4

Assumption 1
One should not use single price level entry, but rather diversify entries with several contracts below median line

Assumption 2
The upper limit and lower limit on EURUSD will at least be a range of 120 pips

Assumption 3
Obviously everything may go wrong some days and risking 25% of capital on a single day is max risk

Assumption 4
One currency and one losing trade only per day

Under these assumptions I conclude that leverage 20 per contract will be highest usable level in daytrading on EURUSD

I prefer 5 times lower risk and leverage with 3 contracts.

regards
Rom
 
Posts: 581
Joined: Sun Feb 07, 2010 10:35 am

Re: What is too high leverage in daytrading?

Postby Rom » Sun Mar 20, 2011 8:32 am

Same computation when using 200 pips as range for day

Upper limit: 1.4200
Median line: 1.4100
Lower limit: 1.4000

Worst case scenario
Entry1: 1.4100
Entry2: 1.4050
Entry3: 1.4000

Stop loss: 1.3950

With 3 contracts
Max drawdown: 25,00%
Use leverage: 11,7
.
Rom
 
Posts: 581
Joined: Sun Feb 07, 2010 10:35 am

Re: What is too high leverage in daytrading?

Postby Moreno » Mon Jan 26, 2015 11:34 am

it was nice, but for me too dangerous if we are trading using high leverage but we have bad psychology. Due to the high leverage with our trading psychology bad we will not be successful in this business. trading with high leverage allows us to trade with greedy. So i am prefer to trading with small leverage like is 1:500 of freshforex
Moreno
 
Posts: 97
Joined: Thu Nov 27, 2014 10:35 am

Re: What is too high leverage in daytrading?

Postby darklot » Mon Feb 09, 2015 5:55 am

traders who have discipline and maximum trading capacity will greatly help the development of their careers in the forex business. In addition, Anybody willing to survive in this business must always take money management into consideration when doing this business,the good thing about proper money manage is that even if our entry is wrong we are still gonna end up making something from the market,though it will require time and patient but the truth is that it will surely pay off and yield good profit as well. of course, account conditions and order execution is crucial also. I currently trade with a broker that uses ECN technology that reduces latency and the execution is super fast. As well, they have specific Liquidity providers who can handle price action strategies as well as very good conditions (EUUSD 0.2 -0.5). I know these brokers are limited, and you won't find them among the biggest brokers lists as 99% of them are alleged market makers. You'll have to work a little harder and dig a little deeper as I did to find Tickmill
darklot
 
Posts: 118
Joined: Fri Nov 07, 2014 3:39 pm

Re: What is too high leverage in daytrading?

Postby rohmatul » Sat Feb 14, 2015 2:21 am

Using too high leverage will waste our times for making money. In Liteforex broker, I've choose and used 1:500 leverage in micro account.
rohmatul
 
Posts: 35
Joined: Mon Jun 17, 2013 10:46 am

Re: What is too high leverage in daytrading?

Postby darklot » Mon Feb 16, 2015 1:36 am

put secure above your profit, so our account wouldn't become a compulsively trapped due over leverage.
One of the key differentiators between hedge funds and other investment vehicles is the use of leverage. Leverage can be your best friend one day, and your worst enemy the next. Everyone knows that leverage will accentuate both gains and losses. My current brokers Tickmill offer 1:500 max leverage, trade from 0.01 lot; I respect them for not offering an extreme leverage such 1000 or even 2000 leverage ratio, which obviously dangerous for any new traders, and none of any expert traders suggested such leverage ratio.
darklot
 
Posts: 118
Joined: Fri Nov 07, 2014 3:39 pm


Return to Newbie questions & answers



cron