Question by : Trading Forex with Leverage – questions?
I have a couple curiosity questions that I’d rather not ask a broker (without sounding like an idiot).
When Trading Currency (Forex) with 50:1 leverage:
What is practical for trading timeframes? Seems like trading 1-hour to 1-day bars is the better choice (as opposed to intra-hour), but are there interest costs (on margin) with the broker when holding Currency positions for long periods?… like several days or even months?
Do brokers “cap” the number of Currency lots that can be traded with leverage? I understand, for example… I could trade 100,000 (1 lot) with only $ 2000; but could I trade something huge like… 10,000,000 with $ 200,000?
Thx
Best answer:
Answer by JoeyV
In the world of trading FX $ 200,000 is peanuts. You aren’t even close to trading in the big leagues which is the Interbank market. You can trade futures comfortably though. It’s much better than the silly retail market.
The leverage doesn’t have anything to do with the timeframe fo your trade. The timeframe of your trade depends on the strategy you are using to trade. I typically trade FX with a timeframe of weeks or months. Other people do it on timeframes of hours. You need to work on your strategy without regard to leverage. Once you have the strategy down, then factor in leverage to your risk manegement. If that doesn’t make sense to you, don’t do this.
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Tags: Forex, Leverage, Questions, Trading
Timeframes dont accually have anything to do with Leverage ratios. Timeframes is part of a trading style. you need to decide what times are best for you. the smaller you go the more intense your trading can be. if your comfortable with 1 hr or 1 day times, then stick to them.
Brokers dont technically cap how many contracts you controls. (unless they say otherwise). but maxing out your margin is dangerous and wreckless.. ie the example of 10,000,000 of currency. your lot size is 100 standard lots. for each pip of movement. you risk $ 1000.00. now its not hard for (Example) the Eur Usd to move 100+ pips a day, which means that you have just lost 50% nice work for one day, (Not to mention the Margin call you would have well before you reach that point).
Its believed that a person should manage risk, by only placing 2% of their account on the line for any one trade. also an overall risk is warrented. often 6-8% (Max 3-4 Trades). in the case of $ 200k risk per trade would be $ 4000 dollars, or 400k of currency, and as for max trades, that would be 1.6M at most. (which is about one 10th of max margin).
I’ve learned from beginner webinars, where you can also ask the speakers questions. Events at forexpros.com has a listing of upcoming forex webinars. good luck
Hi,
First of all, you need to be aware that a high leverage( for example,1:500) gives you the opportunity to trade a higher volume with less funds than if you were using a low leverage(1:1).
Also bear in mind that the higher the leverage, the higher the risk.
Usually each broker charges a fee for keeping a position open overnight, called rollover or swap. You should be able to find a full list of swap rates on your broker’s web site.
Regarding the funds you wish to start trading with, usually brokers decrease the leverage of your account once your equity reaches for example 100 000 USD.
However, some brokers may allow you to use a leverage of over 1:500 even if your account equity is high.
The reason for this is that most regulatory bodies specify client’s categories and to give you an example, if a trades has an equity of at least 500 000 USD he/she can be considered a professional trader, therefore he/she has knowledge/a degree in this field and understands the risk involved in trading.
You can check this equity limit for having the maximum leverage with your broker.
Good luck with your future trading!
Best Regards,
FXCC Representative