It does not matter how much leverage you decide to trade with, it is not the reason why you blow your account. Leverage is a tool and maybe the best tool in trading, but you need to know how to use the tool if you want to use it to your advantage or the tool will use you. Many new traders as well as an astonishing number of self-proclaimed experienced traders claim high leverage is bad for portfolios and will cause your account to come crashing down; this is a myth.
Leverage has nothing to do with that. You should pick leverage according to what you feel comfortable with and understand that the amount of leverage will never cause your account to go from boom to bust.
Why do forex traders blow their accounts?
The sole reason for this is terrible or non-existing risk management. Risk management is vital for bottom line protection and needs to be executed properly. Forex traders blow their accounts as they disregard risk management and fail to implement it.
The use of leverage is for you to earn more profit and not to blow your account. But when it is not well managed it can lead to loss of huge capital so precaution should be well taken.
One of the key differentiators between hedge funds and other investment vehicles is the use of leverage. Leverage can be your best friend one day, and your worst enemy the next. Everyone knows that leverage will accentuate both gains and losses. My current brokers offer 1:500 max leverage, trade from 0.01 lot; I respect them for not offering an extreme leverage such 1000 or even 2000 leverage ratio, which obviously dangerous for any new traders, and none of any expert traders suggested such leverage ratio.
Check what did 1:500 leverage do to accounts yesterday
The use of leverage is for your to trade more while you have less capital and so it is of great advantage. But how you handle it matter because it can also be very dangerous when it is not handled properly. The more leverage you use the higher your risk in trade. And so it requires proper experience and trading skills.
Trading with high leverage is and advantage to only one party in the chain : the broker
Actually, in this market place, leverage is considered as important financial indicators that allow an investor to grow his market in a level that exceeds the initial investment. Pragmatically, most of us trader’s are willing to trade in a high leverage to make profit in a short time. But, it can be the right way at all. I always use small leverage for avoiding risk although I ha getting 1:400 leverage from my trading place.
If you use a high leverage and the trade goes the opposite way than you predicted, you are sure to blow off your account.
I think leverage has to do with your capital, depending how low or high is your capital then leverage needs to be set accordingly. Low capital more leverage high capital less leverage.
Try it ...
Then you shall see why a lot of people are telling that high leverage is suicide. Use demo. Better that than to repeat the same thing again : do not use high leverage account
sure i will do so but my concern is that i want to start with low capital and through my progress i will increase capital. Dont you think that with low capital is better to have a higher leverage ?