How To Choose The Right Leverage In Forex Trading?
Forex trading offers high leverage that allows traders to target large market positions with less capital. Leverage can be a boon or bane for traders, depending upon how they use it. If you use leverage and the market trends in your favor, then you can multiply your gains. However, if you are wrong, the same leverage exacerbates your losses.
To be successful at forex trading, you should have a healthy respect for the market, but when emotions like greed take the front seat, that’s where you start losing the game. Desperation to recover losses that you suffered in the hands of excess leverage can wipe out your account. You have to stick to your plan, strategy, and realistic goals. Make sure to use the right money management rules and always risk only a certain percentage of the total capital, which should not be more than 2%.
If you have vast experience in trading, then you can benefit from high leverage. Here are some brokers that provide high leverage:
- Coinexx – 500x
- EagleFX – 500x
- Turnkey Forex – 500x
- Pax Forex – 500x
- Finpro Trading – 500x
- LQDFX – 500x
- LMFX – 1000x
- Tifia – 1000x
- Mtrading – 1000x
- Fxglory – 3000x
How to select the right leverage?
There is a direct relation between leverage and its impact on your trading account. The higher the amount of effective leverage, the greater will be the swings in your account equity and vice-versa. As tempting as it may seem to use high leverage to magnify your profits, you should never forget that using high leverage can drain your entire capital in a blink of an eye. So, make sure to follow certain precautions when trading with leverage.
- Don’t try to emulate professional traders who use 500:1, 1000:1, or even higher leverage. Use what you are comfortable with, which could be 100:1 or 200:1.
- Limit your losses to a manageable size to keep your account up and running.
- Use protective stops because you can’t monitor your trades all the time. Price movements are so rapid in forex that a small distraction can lead to huge profits or losses. So, make sure to use stop loss to limit the impact of a losing trade.
- If the price action reverses at some point, but you failed to stick to it, fret not. There are other trades as well, which you can enter to offset that minor loss you’ve incurred from the previous trade.
The key is to analyze the market carefully and place your trades with due diligence instead of being emotional and losing it all.
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