Choosing the right leverage in Forex

I intend to invest 2000$, on a leverage 1:100. I hope it isn't going to hurt. Thanks

No, it won't hurt at all. The only thing you need to remember - if this is going to be your first live trading experience, do not trade 10,000 unit lots at the beginning, because they'll drain your account pretty quickly. Mini-lots of 1000 to 3000 units would be good to begin with. Once you are comfortable with your performance first of all, plus know firmly how math behind your trading account works, you may increase lot size slowly, controlling the risks and evaluating the size of losses you're comfortable to take per trade or per trading session.

Leverage is your friend, until you start overusing it. Higher leverage makes margin requirement for any trade lower, thus enabling you to operate larger funds while managing a small account or sustain larger losses without receiving a margin call in case market is temporarily moving against you.

For example,
to ensure you'll be able to cover any losses which might incur on your trading positions, with 100:1 leverage a broker can establish, for example, 1% margin requirement, which means that, if you wish to open a new position, you must have 1% of the size of that position available as margin. If you take 20:1 leverage, margin requirement may rise to 5%. In the case with 1% margin requirement are further away from margin call and can trade more positions than with 5% margin requirement.

When traders begin overusing leverage power, e.g. biting off a lot by placing large orders with small size accounts, they commit themselves to quick losses once market moves few pips against them and get no benefit from leverage whatsoever, but rather fall into the trap of big dreams of big quick profits with little money invested.

Forex for beginners

M y name is oriyomi, from Nigeria. I have been Demo trading for sometime and i am going live soon, please i need you to explain this to me. I intend to open $200A/C with 100:1. Can you please tell me how much p/L i will be making per dollar/trade when using 1 lot & 0.5 lot.

Hi Oriomi,

There are 3 types of lots:

Standard lots = 100 000 units (for standard size accounts)
Mini lots = 10 000 units (for mini accounts)
and micro lots = 1000 units (for mini and micro accounts)

With the investment of $200 you'll be able to trade mini and micro lots.

If you trade one mini lot, you'll be earning approx. $1 per pip (+- few cents depending on a currency pair you trade).
0.5 lot would be worth 50 cents.

If you trade one micro lot, you'll be earning $0.10 per pip.
0.5 lot will be worth 5 cents.

Forex for beginners

hi, would like to ask your opinion. i have been using demo trading all the way and thought of opening a live account soo. however i am only going to invest 3000 USD as my capital. What account would you suggest me to open? mini or standard? will opening standard be a problem due to the margin and leverage? with 3000USD and standard account, will i be able to have 2 trade and and 1 stop loss and one time?

You have to compare trading conditions for both accounts:

#1 Lot size - you do want to be able to trade micro lots (0.01 lot or 1000 units). Why? If at some point of your first live Forex trading experience you happen to strike a losing trade after a losing trade period, it could make you uncomfortable at first (some traders may develop fear over trading for a moment), this is ok, but you have to be able to reduce your risks to a minimum and continue trading once the bad times are over. It helps a lot if you have a room to maneuver, e.g. a smaller lot size to trade comfortably.

#2 Leverage - everything with 100 : 1 and above would be fine. Make sure you understand that just because you're leveraged, you cannot trade awful lot of money. Take 1 or 2 orders at the time, so you can track your account balance and figure out how the leverage works for you.

#3 Spread - standard accounts may have lower spreads comparing to mini accounts, although it is not always the case. Either way, point #1 is the most important point, everything else comes afterward.

You will be able to open a single order of 2 lots and put a single stop for it. You can also open two orders 1 lot each and put two stops - one for each order, if that's what you mean.

what ?!? u advice a noob to trade X 100 LEVEREGE and more....hahah think again brother, i hope i misundersood you.

No did not, a noob can easily trade with 100x leverage and higher, if this noob has got any skills to trade it. Have YOU ever traded Forex live? Your comment rather suggests that you have been reading about the dangers of leverage everywhere, which has scared you to quite much, but other than that you have no live experience to base your arguments on. No problem, I welcome all comments.

I have $800 I will like to use 50:1 leverage with lot size of 0.5 How much will be one pip on EURUSD.