Leverage Isn’t a Bad Thing

[37riched]

In my opinion, leverage and risk management go together. It is not bad to take leverage, but don't be duped by a big ego to take more than your account can sustain. Leverage is one of the best tools in the forex market, but it can also kill your trading career if used unwisely

 

[Ethanfx]

leverage is good until you know how to manage and you have tested and successful strategies and a great presence of mind.

 

[Nikolas84]

Leverage is double-edged sword. It can help to manage your position properly and deploy big positions with less margin in your account, but if you are not controlling risk super mega-strictly than most probably leverage will only help your broker to become richer. Leverage above 100:1 is totally unnecessary as it posses serious risk for margin call in a matter of hours and even minutes if there is not a very tight stop loss in place. I am using varying level of leverage, but most of the time no more than 20:1. I use 100:1 leverage only on some very short term scalping trades, where my stop is no larger than 10 pips. If you still believe that 500:1 leverage is good thing, than you are in big trouble.

 

[Aaronpp]

Leverage is not bad because you can do a business that can work perfectly but you must handle it the best way because your earnings must be potential so that your risk can be reduced as little as possible, But the losses will be potential and above all must not be too high a leverage because that will eventually lead to ruin.

 

[{0v0}]

Leverage itself is not a risk factor. It only determines how much of your account balance is set aside as initial margin. Leverage is only dangerous when it is abused by taking larger positions, with the corresponding larger risk, than one's account can safely withstand.

It is the position size that is the risk factor, and one should always be aware how much of one's account is at risk should an overall position exposure hit one's stops.

A general rule-of-thumb often used by traders is not to risk more than 1-2% of one's equity at any one time across all open positions unless, for example, some positions already have a locked in profit (i.e. where the stop level is now at break-even or better).

If one has multiple positions then it is wise to also check whether there is any correlation between them in assessing overall exposure.