Ideal amount of leverage to use
Markets Forex

4 Likes 0 Dislike 2 Replies
1 year ago

HI everyone,

I have two questions: 

a) How much leverage do you use? 

b) Do you think that is the ideal amount of leverage that one should use? If not, what do you think would be the right amount of leverage?

I understand that with greater leverage, there would be greater profit every time your trade is successful. However, with greater leverage, chances of large losses would also be higher. In fact, higher leverage would increase the chance of a trader's entire capital getting wiped out. So, what is the best amount of leverage according to you?

Posted 1 year ago 0 Likes   0 Dislikes

Mia is quite right, Brian. Focus on limiting your risk per trade. Work backwards from there and calculate the amount of leverage that would be appropriate for you. Don't worry too much about the maximum amount of leverage being offered by your broker. As you have correctly mentioned, higher leverage also means higher amount of capital at risk per trade. You want to ensure that no matter what happens you definitely do not lose a substantial portion of your capital on a single trade. 

So, don't even think about the maximum amount of leverage available to you. Most traders that I know hardly use more than 10:1 leverage and many of them use just 5: 1.  

Posted 1 year ago 1 Likes   0 Dislikes

Hi Brian, 

Typically, traders focus on limiting the amount of risk that each trade carries. Most veteran traders suggest that you should not risk more than 1% to 2% of your actual capital on each trade. Based on this, you can calculate the ideal amount of leverage for yourself.