But a less risky way to reduce the risk would be dividing the whole investment into small chunks and then using it (from purse to account), lets say, $500. And then using leverage to gain. I have observed that traders are far better off using this technique (because "leverage" in effect means "using other people' money).
By the way, an important thing we are missing here is the type of broker we are trading with. Virtually every broker out there is a market-maker (trading against us, if we make profit, they lose and vice versa, so there is a conflict of interest). They don't send our trades to ECN markets and keep them in-house.
If you deposit $100, and the broker gives you 2000 leverage, you buying power increases to 200,000. This means the broker is giving you their own money to invest. What if you lose ?? Nobody knows how the trade will end u, if you lose, that means you lost the whole $200,000. So why would someone give you $200,000 to trade when everyone knows 95% traders lose.
They keep our trades in-house and have created an artificial underground market. When there is a profitable trader, they send his trades to ECN or inter-bank market, and makes money by way of charging spread. Also note, variable spread model is more profitable for brokers than the fixed spread broker model.
It works like this:
Spread: 3 pips
Trade Profit Pips: 30
Broker takes: 3/(3+30) = 9.0% of the trade's profit.
This is how they work. Period.