What Is Leverage on Your Optimal Forex Trading?

Leverage is generated from the use of loan capital as a source of funding when investing to expand the company's asset base and produce a return on risk capital.

Leverage is an investment strategy for using borrowed money - specifically, the use of various financial instruments or loan capital - to increase the potential return on investment ... Investopedia

Recently I was asked, "What is the optimal leverage to use trading with The Amazing Trader program?

I think of my reply for some time because there is no one size that fits all answers because it depends on several factors.

So I decided to ask for input from some of our customers about optimal leverage in general.

I want to go beyond just my opinion and see the perspective of other Forex traders who trade with a margin with their regulated broker.

The following are from veteran Forex traders who subscribe to Amazing Trader:

From the Veteran Forex Trader

For me, leverage is a subjective thing that depends on the moment. I always think about what my doctor said when discussing blood pressure:

"If your heart is pounding, you sweat, you can't sit still and you worry all the time, then your blood pressure is too high."

The same applies to leverage, and that depends on your time frame and the trading situation.

For example, to trade AT (Amazing Trader) on a 5m and 15m time frame, you might sit in front of the screen and be able to quickly close trades that have gone awry.

You also have the advantage (if you are psychologically prepared to take it) knowing when to leave, based on the AT price level. You then adjust your leverage based on how much cash you have and the size of your trade.

If you work on a longer time frame, you may not be in front of the screen all the time. "Tiny leverage", for me, could mean being able to hold a few hundred pips in the wrong direction without worrying.

All brokers say you have to risk no more than 2-4% of your equity per trade. That's not a bad place to start.

From Jay Meisler:

I advise traders to reduce the risk (eg, 1% of equity per trade or lower) until he shows the ability to generate profits consistently. The key word here is "

One way to do this is to get access to programs such as The Amazing Trader and strategies that are designed with the aim of highlighting high probability trading opportunities.

Once this is achieved, leverage can be increased so that there are greater risks / rewards per trade. I call this trade form Illustration: $5000 account trading the EURUSD.

- # pips at risk -

As you can see in this table, the higher the leverage, the less leeway in terms of the number of pips at various levels of equity risk per trade.

In other words, at 20: 1 leverage, only need to stop 20 pips triggered by losing 4% of capital.

Remember that with the increase in profit potential, the risk of loss arises. As the table above shows, the higher the leverage, the less trade allowance.

In any case, a trader may not place his capital at risk as long as it will make it difficult to continue trading if proven wrong.

In other words, the preservation of capital and wise money management is the key to living to trade on another day.

So the point is there is no clear answer as to what optimal leverage is because a lot depends on many factors, such as risk tolerance, whether traders choose to keep the risk tight (for example sitting in front of the screen) or choosing to trade using a longer time frame.

In any case, if you have to worry about losing too much on trading your leverage is too high.

So, do you find it helpful? And if you have any topic which you want me to cover for you then please let me know.