It seems that low-volatility portfolios tend to be more highly leveraged. Why is this ok?
Does it make sense to raise leverage if a trading strategy is low volatility?
- Thread starter helpme_please
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helpme_please
it must be sunday cuz you have begun your spree of questions...please tell us a little so we have a little more background to work with when answering all your questions
it must be sunday cuz you have begun your spree of questions...please tell us a little so we have a little more background to work with when answering all your questions
At the end of the day, what you are tracking is the change in your PnL.
Leverage can be a proxy for volatility. When you apply both, leverage to a highly volatile asset, that's what takes you into a difficult to manage risk management situation where the PnL swings can bring you to ruin.
Leverage is one of the most powerful tools we have, if used intelligently...
"Trading on leverage"... any market... is mostly a matter of greed and hubris. If you get away with it, fine. Leverage is a "2-way street", so don't be surprised if it bites you in the butt.
So for every CL contract traded, one should have ~$45k to avoid being greedy? It depends on an individuals trading style...but in my opinion, if your are trading intraday, you'd be crazy not to lever up.
Crazy or not, leverage increases risk... regardless of how "clever" a player you perceive yourself to be.
I absolutely agree with you. But you have to have exposure to risk to make money. Sometimes leverage is the only way to increase exposure enough to achieve reasonable returns. Especially in forex and futures