Leverage beyond 1:100?

Listening to peoples understanding of leverage really brings a smile to my face. It is amazing how people can be exposed to the same amount of knowledge but some will just fail and others will excell at applying that knowledge. It is important to all those who think that leverage is an issue even if we hold the variables of liquidity contraints constant, really have to go out and read all the books they can and do a lot of ground work.


If you only want to loose 2% on a trade, whether leverage is 20, 50 or 100, you will loose 2% on that trade. The only time you will loose more than that is if there is a liquidity crises preventing you to close out at that 2% level. I guess deep down i am actually happy that most don't grasp this concept since it means that due to transitivity there is many other things that you don't grasp, and i am the lesser fool in this market.
 
Quote from Nashequilibrium:

If you only want to loose 2% on a trade, whether leverage is 20, 50 or 100, you will loose 2% on that trade.
More...

Not correct.

If you are trading using 100:1 leverage, you cannot limit losses to 2%. The spread alone could put you more than 2% down.

At normal levels, I agree, leverage doesn't equate to risk, but very high leverage implies a big chunk of the account at risk on each trade.
 
Quote from euclid:

Not correct.

If you are trading using 100:1 leverage, you cannot limit losses to 2%. The spread alone could put you more than 2% down.

At normal levels, I agree, leverage doesn't equate to risk, but very high leverage implies a big chunk of the account at risk on each trade.
More...


Yes, right now it seems so to you, but when you get that knowledge........you will go a...haaaaaaa to youself, so thats how its done. I can see where u coming from and why you think you are right, but you are in fact wrong but i will not tell you why you are wrong just that there is ways around that issue.
 
Quote from Nashequilibrium:


If you only want to loose 2% on a trade, whether leverage is 20, 50 or 100, you will loose 2% on that trade. The only time you will loose more than that is if there is a liquidity crises preventing you to close out at that 2% level.
More...

Only if you papertrade. In real world brokers don't even guarantee that stops loss get executed...
 
Quote from mrstocker:

Only if you papertrade. In real world brokers don't even guarantee that stops loss get executed...
More...

We all deal with slippage and thus factor it into our simulations, most slippage is reasonable at around a few points but doubt it will be equal to your stoploss. I know few years back that bucketshops will ignore your stops totally but i havent heard any complaints of that anymore from at least the top 10 retail fx brokers.

At the end of the day with slippage you may loose around 2.4/5%. I mainly gt slippage on exotics such as nok, sek, czk but those are also reaonable.
 
Quote from cabletrader:

I never bother to work out the leverage I used for a trade, there's no need.
More...
Right, we're on the same page here. I don't think anyone here is concerned with leverage as a significant factor of the trade-size decision other than the OP. It is, as you said, a by-product calculation based upon other factors.

That being said, I'd really like to see an example of a 150:1 trade employed in a safe r/r scenario, which you agreed with operator was possible.

As euclid correctly pointed out, at such leverage, the spread is going to cost you 1-4% immediately (it will differ based upon the spread, but it will be in that neighborhood).
 
The major benefit of high leverage is to trade multiple pairs simultaneously.

It can be a force multiplier, if a trader knows what they're doing.
 
One thing I don't see people considering is that you could be levered 100:1 in your account yet only 5:1 on your networth. The less money you put at risk by keeping with your broker, the better, so that is why leverage of 100:1 or greater can easily be used by a sensible trader.
 
Quote from NY0BScalper:

One thing I don't see people considering is that you could be levered 100:1 in your account yet only 5:1 on your networth. The less money you put at risk by keeping with your broker, the better, so that is why leverage of 100:1 or greater can easily be used by a sensible trader.
More...

yes, that is one option but not the most efficient.
 
You must log in or register to reply here.
Back
Top