Can you choose what leverage to use before each trade?
- Thread starter nwoptions
- Start date
It seems to many that the lower the leverage, the higher the risks. If you are one of those who thinks this way, then you are mistaken. Risks increase with the wrong choice of a broker, since an unscrupulous company will find a way to drain the deposit, regardless of whether the trader has chosen a leverage of 1: 500 or 1:50.
You can have it disabled. I told my broker to do that after accidentally betting $10,000 leverage on KOSS and loss $800 or 20% in less than 5 seconds.
Your concept has fatal flaw.
If you call it percentage of capital, then you can't use capital that you don't have, correct?
One ES contract is worth $200000, and you can trade it with $500, so how much percentage of capital you use? You use 400 times of your capital.So the 99.75% capital is not yours, but broker lend to you. It is a joke to call it percentage of capital because you don' have that capital. It is the amount of capital you borrow, which is called leverage.
Leverage is not fixed.
The leverage broker set for you is the maximum margin that you can use.
(leverage and margin have same meaning. Some broker call it leverage, some call it margin.)
If a broker offer you 500:1 leverage, you can use 1:1, or 10:1, or 100:1 leverage, but you can't exceed 500:1.
If you have a MT5 platform, once you place a trade, you can see your position where it also show your margin used and free margin.if your trade amount is bigger, your margin used is bigger and free margin is smaller.
That tell you that you can choose the the level of leverage you decide, and it is not fixed.
For each trade I can decide how much money I want to borrow, that means for each trade I can decide what leverage I choose.
For a cash account, yes, you can use the term percentage of capital, because all the fund you trade are yours.
But a forex account or futures account, you can only use term "leverage", because the money you trade are borrowed and the meaning of leverage is borrowed fund.
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The 500:1 leverage broker offer does not mean your leverage is 500:1. Because only you can decide what leverage you want to trade, not broker.Broker can't force you to trade with 500:1 or 50:1 or 5:1 leverage. If you don't trade, you don't have a leverage. OK?
Check out Wikipedia for the term"leverage".
leverage only occurs when you borrowed fund. If you don't trade, only open an account with 500: 1 leverage, you don't have leverage because you have not borrowed any fund yet.
The 500:1 leverage broker offer you only means when you trade, you can't borrow more than 500:1 ratio.
Check out Wikipedia for the term"leverage".
leverage only occurs when you borrowed fund. If you don't trade, only open an account with 500: 1 leverage, you don't have leverage because you have not borrowed any fund yet.
The 500:1 leverage broker offer you only means when you trade, you can't borrow more than 500:1 ratio.
If you can buy $200 000 of stuff with only $500 that means your broker is:
1: lending you $199 500 (you will pay interest on that loan, for stock or Forex trades).
2: giving you a 400 to 1 leverage.
This 400 to 1 leverage does not change no matter how much money you have in your trading account, your bank account or under your mattress.
You CANNOT, repeat CANNOT, change the leverage that your broker gives you, you can only change the % of capital that you allocate to a trade.
And again, that percentage is NOT leverage and has absolutely nothing to do with leverage.
Get it?
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Of course it changes.
If I have $1000 in my account, I can buy one contract, or two contracts. If I buy one, I use 200:1 leverage. If I buy two, I use 400:1 leverage.
Broker offers me permission to use leverage, but until I use it, there is no leverage.
It permit me to use from 1:1 to 400:1 leverage, whichever I choose.
So the leverage dose change as each trade occur, but the permission doesn't change.
https://en.wikipedia.org/wiki/Leverage_(finance)
In finance, leverage (or gearing in the United Kingdom and Australia) is any technique involving using debt (borrowed funds) rather than fresh equity (value of owned assets minus liabilities) in the purchase of an asset, with the expectation that the after-tax profit to equity holders from the transaction will exceed the borrowing cost, frequently by several multiples — hence the provenance of the word from the effect of a lever in physics, a simple machine which amplifies the application of a comparatively small input force into a correspondingly greater output force. Normally, the lender will set a limit on how much risk it is prepared to take and will set a limit on how much leverage it will permit, and would require the acquired asset to be provided as collateral security for the loan.
As you can read, leverage is the amount of debt you borrow to purchase an asset. If no purchase happen, there is no leverage.
What broker offers you is "how much leverage it will permit". it is the permission that doesn't change.
Who decides leverage? Brokers? Joke.
Only traders can decide how much money they want to borrow.
Brokers decide permission.
Traders decide actual leverage they want to use, which is the same as what amount of fund they want to borrow.
It is like you borrow from credit card.
Card limit=leverage permission broker offer
Each transaction that you borrow from your credit card=actual leverage you choose for each trade
The permission to use leverage doesn't change, but the actual leverage you use change all the way.
If I have $1000 in my account, I can buy one contract, or two contracts. If I buy one, I use 200:1 leverage. If I buy two, I use 400:1 leverage.
Broker offers me permission to use leverage, but until I use it, there is no leverage.
It permit me to use from 1:1 to 400:1 leverage, whichever I choose.
So the leverage dose change as each trade occur, but the permission doesn't change.
https://en.wikipedia.org/wiki/Leverage_(finance)
In finance, leverage (or gearing in the United Kingdom and Australia) is any technique involving using debt (borrowed funds) rather than fresh equity (value of owned assets minus liabilities) in the purchase of an asset, with the expectation that the after-tax profit to equity holders from the transaction will exceed the borrowing cost, frequently by several multiples — hence the provenance of the word from the effect of a lever in physics, a simple machine which amplifies the application of a comparatively small input force into a correspondingly greater output force. Normally, the lender will set a limit on how much risk it is prepared to take and will set a limit on how much leverage it will permit, and would require the acquired asset to be provided as collateral security for the loan.
As you can read, leverage is the amount of debt you borrow to purchase an asset. If no purchase happen, there is no leverage.
What broker offers you is "how much leverage it will permit". it is the permission that doesn't change.
Who decides leverage? Brokers? Joke.
Only traders can decide how much money they want to borrow.
Brokers decide permission.
Traders decide actual leverage they want to use, which is the same as what amount of fund they want to borrow.
It is like you borrow from credit card.
Card limit=leverage permission broker offer
Each transaction that you borrow from your credit card=actual leverage you choose for each trade
The permission to use leverage doesn't change, but the actual leverage you use change all the way.
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