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LESSON: Broker Leverage

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[op_liveeditor_element data-style=””][text_block style=”style_1.png” align=”left” font_size=”16″ font_font=”Montserrat” font_color=”%237e7e7e”]This section is added to the course simply because of the amount of students who request help and email in looking for help on the subject of both; the amount of leverage they should be using and an overall sense of confusion with what and how to use leverage properly.

Fear & Leverage – Education

Firstly what is leverage? It is the Forex lever we use to lift out trades. It can be as small as we like or can be huge.

If I am using a 1: 100 leverage that means for every $1 I put down myself, then the broker will put down $100 for me. Why is this so much fear and so many scared about leverage?

Because there are horror stories EVEYWHERE. Everything from the Forex markets, CFD market and your bank will give you margin you trade stocks.

Looking at just the Forex example for a moment though; if a trader with about 15 minutes or less education and had read about all the fast money they could make through binaries, or a similar market, they dislike their job and having a crap day.

They join up to a broker where there is NO TEST to make sure you have some knowledge about the markets and leverage of which there are a lot of brokers.

They open an account sure they are going to make money, see ‘leverage’… Google it and go ahead with 1000: 1. Within minutes the live account has cash in it, trades are placed and this story can be found all over the internet thousands of times everywhere played out many different ways.

That is Not What Leverage is For

I have traders and students so scared to even think about using leverage they will not even turn there demo accounts of 1:1 so hopefully what I have started to explain and what you will here in this next part will tie it altogether.

Yes – leverage increase rewards and yes – it leverage increase losses. Leverage is “leveraging” anything we trade.

However; we counteract this with our risk management measures that we put into place that we have been discussing in this last module of the Transform Your Trading course.

If you had a huge amount of leverage and made random trades like a lot of people do, then that would be outrageous dangerous.

But, you are not going to be doing that!

Before you enter each and every trade, you work out your position size. Whether you are using 1000: 1 leverage or 1 : 1 leverage you will be risking 3% or a set $ amount every trade.

The only problem is… if you are using a really small leverage such as something under 20:1, then you probably will not have enough money to place your trades that you want to place.

Individual Broker leverage

Most good brokers offer different leverage options from 50:1 to 500:1. Most people trade from 100:1 leverage, so each mini lot ($10 000) that is purchased requires $100 in your trading account, each full lot ($100 000) purchased requires $1 000, and so forth.

Most traders, when they start trading live accounts, after successfully trading demo, trade with a few (1-2) mini lots, until they are comfortable with all aspects of their trading before they start to progress their lot sizes.[/text_block][/op_liveeditor_element]