"Slow is smooth and smooth is fast"
Indeed, big leverage is the 'cheese' that ruin retail traders.
All big forex players, banks, institutions etc. use no more than 1 to 3 times leverage.
It is very sad that majority of the people that get involved in the forex business end up losing their money but I will explain the major reasons why this happens below:
1. Leverage and Margin - Trading on margin seems like a fast way to make quick profit however, this gives birth to greed as a result of margin abuse. Research has shown that high leverage contributes largely to the number of capital losses prevalent with margin trading. Without margin, trading forex and cfds will be like every other business. It is therefore not surprising that CFTC (commodities and futures trading commission of the US) made it compulsory for all brokers in the US to offer a maximum leverage of 1:50. Statistics have shown that since the CFTC rule was set in 2010, more retail traders are now profitable.A proper understanding of leverage and margin is very important if any trader is to be successful in the business for the long term.
2. Half baked education- This is another major mistake many traders make. When a trader is trained by someone who cannot hold an account for more than 3 months consistently, you don't expect the trader to be consistent. You cannot learn how to drive in a driving school where the teacher cannot drive. Next time you want to learn any business, please make sure you approach someone with a proven track record in the business. Many forex trainers do not have performance history of even 3 months. Forget all the sweet talk, proof is everything.
3. Pressure - In my over 12 years trading career, I have seen very good traders who lost all their money over and over as a result of pressure from bills. If you put the weight of your bills on your small trading account, it is bound to crash. The best traders in the world make an average of 3% monthly ROI. They have large funds and its almost effortless. Forex trading is not a get rich quick scheme so quit the gambling if you must be consistent.
I fully agree with these 3 main reasons that bring it to the point! There is really not much to add :)
When I found out about daytrading many years ago, I instantly inhaled tons of "good" books (in fact most were too superficial) and tried to "apply" all these gold tips in the very next opportunity where I could just click and win money. I felt like an energized rocket star who would win the world within months!A demo account with high amount of virtual money nourished my naive beliefs. So started right off with real money and with my total ignorance about money/risk management I found myself in the grinding mill of long suffering pain, ofc fueled by my greed. (No need to mention I busted my account. After repeating this for like 2 times, I was pretty much banging my head against a wall until a friend told me to stop and try something else: To slow down everything and learn to trade stocks. It took me a while to get into it, but then I enjoyed a refreshing different angle. I'm doing so for a couple of years successfully and with much ease on my mind - and in the meanwhile I continued self-educating me in trading topics, I'm now having way much better results with my daytrading.Without pressure, no need to pay anything with trading profits, and sticking to a strategy + risk/money management plan, there should basically never be any emotional imbalance.
Hopefully others learn from Chinedu's wise tips and avoid the mistakes like I did. Good profits and a relaxed mind to you!
I just read my comments once again and i didn't speak about volume at all so i dunno what you trying to say by this, but hedging is not just one strategy that depends solely on the volume, this is a bit limited description
Im also scalping and this is notorious in the forex market but yet im making money, last year September until today i made 12% so riddle me this!!
There is no one way of making money in the market, its just different mindsets i have mine and you have yours, regulations are sometimes good for you and sometimes good for me
Trading is not for everyone even without a leverage.
For success, it requires a lot of time to study, to learn, to experience ... for this respect, in my view, it is not different from any other profession which requires expertise.
Most of the people here on this forum or any other place, should only invest their savings in fixed-income instruments or in good companies in stock markets for long term.
But, most of them want to get rich quickly ... and wanting to get rich quickly is always the first step to lose money.
I do not see leverage as a criterion to win or loose. May be with a lower leverage you lose slowlier. Statistics will show if the new ESMA rules, which set the maximum leverage for CFDs to 20 (from 200 to 500), will decrease the losers (actual statistics show about 80% losers, not 95%). Lower leverages makes trading more expensive.
As a fulltime index trader I see the success in trading elsewhere:
This list may deviate for a currency trader. Big leverage can lead to big losses but to big wins, too.
For me trading is not a profession as most others. For example as software developer you may make mistakes, you find them while debugging and correct them. In trading every error costs. Trading is rather like surgery or the profession as a pilot, no errors are allowed. In a normal job if you work more you get more. In trading it might be inverse, less can be more (if you trade on full quality signals a few times a day you make more money). And how many experienced (chief) pilot crash because he wants to get everything out of his machine?
Wonder what you think about my thougts.
I do not see leverage as a criterion to win or loose. May be with a lower leverage you lose slowlier. ...
I agree with you.
In fact, losses will always come since people want to get rich quickly from forex.Whatever leverage, regardless of capital, will continue to experience losses if people continue to think of being rich quickly and easily from forex.Capital starting from $ 100 or $ 100K will be the same, only a matter of time that person will still suffer losses.
In addition on technical and fundamentals knowledge, thenthe knowledge of trading psychology is a must :)
have a nice weekend
This is also the reason many developer here are trying to sell garbage EA with a lot of fake backtest and/or extremelly curve fitted. If these EAs were so good why they want to sell in the markets? This is the key question. For example I will no give any name here but there is a guy that is selling always the same EAs based on momentum over the years, he always recycle his previous EA and make new EAs with different look and he shows extremely smooth equity curve in the past and when the EA is having poor performance hi will re-optimize the EAs with a lot of bla bla bla. This guy is making millions selling illusions to newbie. You need to understand that this is an hard game and these scammer artist know that it is more simple to profit selling garbage then making profits directly in the markets!
So guy don't buy all this garbage, but if you have a capital try to learn a simple while effective strategy, and yes you will have losses and wins but over the time with low risk this is the better way to preserve what you have!