Forex Strategies Forum

[Rom]

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- 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]

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
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