Learn How to Manage Leverage in forex trading
Failure to manage leverage on a forex trading account is one of the factors that makes traders experience losses or even margin calls.
On the other hand, leverage can be an advantage in forex trading which can give traders an advantage over other investments. For traders who have been able to manage leverage, of course, can be used as well as possible. But for those who do not necessarily increase the risk of loss is quite large.
Example of leverage
Leverage 1: 500 in forex trading means that traders use every $ 1 with the possibility of earning as much as $ 500 in each transaction. Of course this becomes an advantage of forex trading. For some traders looking for forex brokers that offer maximum leverage to get more profit potential.
Leverage on Forex brokers
For some traders with substantial funds, they prefer much smaller leverage, such as 1: 2 or a maximum of 1:50. This means that with a capital of $ 50,000, the potential to get as much as $ 100,000 in profit is already a very large nominal.
Leverage formula in Forex Trading.
If you are not sure how much leverage you are currently using. Here’s a simple formula that you can use to calculate it:
The total open position is then divided by the total amount of funds (balance) in your trading account.
We recommend using small leverage.
In general, most forex brokers advise traders to use small leverage rather than large ones, because sometimes a trader forgets to set lots so that when experiencing a continuous loss will experience a Margin Call.
Example if you have a $ 100 fund and use 1: 100 leverage and use lot 0.1. Then when you experience Loss 100 pips then your $ 100 fund will be exhausted instantly.
Use Leverage wisely.
Well, to avoid the Margin Call, it would be nice to start determining how much leverage you need in each transaction. In addition, do not ever trade with Full-Lot in just a few entry positions. Use lots according to the resistance margin you have, ideally the resistance is 500-1000 pips at each entry position.