Perhaps when the new trader watches his account travel that path, he’ll come to his own answer on how to use leverage.
What leverage should be good for a newbie to use?
- Thread starter Coner1980
- Start date
Agreed. It does help to keep in mind plentiful leverage on large sums of money can f*k you up bad, though. Although, as I understand it personal bankruptcy law in the US is comparatively lenient, quickly allowing a fresh restart.
Is your trading account equity pure risk funds that you are OK with losing in short order ? (I ask because the nature of your question suggests that you truly are completely new) Do you have a trading plan ? If so, does it include position management ? If yes, have you honed your system by rigorously testing both yourself and your system in a simulator ?
Make sure the money you use you are willing to lose 100%. Trading is a business so treat it like that. Commissions aren't a problem but an unreliable broker is. I always think of worse case like what if I lose power what's my back up plan.
Risk Management- Only risk 1% max equity on a trade from funds you are willing to lose 100% if you lose 100% of your trades, then trading might not be for you. Find an Edge and take as much risk as you can handle without burning your self.
Trading should be boring, if you're getting a rush you're probably betting too big. Some people treat trading like gambling, those people are problem gamblers at casinos anyway and if you're smart, disciplined and have a solid trading plan you can win less then 50% of the time and still make a profit at the end. You just sometimes need to grow a pair because if prices are low or for example it's a violent move to the downside then it might be a good time to go for a long with a stop loss but you have to make sure there's a bottom forming and prices move in two's so you might end up going down but you never really know price can do. No one really knows that's point of price discovery.
Risk Management- Only risk 1% max equity on a trade from funds you are willing to lose 100% if you lose 100% of your trades, then trading might not be for you. Find an Edge and take as much risk as you can handle without burning your self.
Trading should be boring, if you're getting a rush you're probably betting too big. Some people treat trading like gambling, those people are problem gamblers at casinos anyway and if you're smart, disciplined and have a solid trading plan you can win less then 50% of the time and still make a profit at the end. You just sometimes need to grow a pair because if prices are low or for example it's a violent move to the downside then it might be a good time to go for a long with a stop loss but you have to make sure there's a bottom forming and prices move in two's so you might end up going down but you never really know price can do. No one really knows that's point of price discovery.
Newbies should not use any leverage at all. Period.
I have been trading forex for the last 6 years, and have gradually increased my leverage after thousands upon thousands of trades. As of now, I have a leverage around 2.2 or so.
Only idiots will use high leverage. And of course the gamblers that are treating forex as a horse race....
Having heard from many traders over 21 years, I believe:
- New traders should start on sim until they have gotten consistent in their process. In ideal world something like "don't trade live til after you double your sim account "
- Next, never use margin until you are profitable in a cash account for at least a few months.
Agree, but what is the best limit for a new trader to use leverage, is 1:200 would be good?
1:200? Why don’t you just donate the money to charity. Your chance of being successful with a 1:200 leverage is as high as the charity noticing your good deed, and give you a million as donor of the month.
Anything above 1:10 is just gambling. And unless you are a seasoned pro, you shouldn’t even go as high as 1:10