Higher Leverage means Higher Risks? What does “High Leverage” can really cause to traders’ funds?

November 8, 2017

Does Higher Leverage means Higher Risk?

Higher Leverage means Higher Risks? What does “High Leverage” can really cause to traders’ funds?

Let’s have a closer look.

It is told that higher leverage means higher risk.

Nowadays, higher leverages are related to the Forex market. Thus, it is often said that Forex market is risky. This deduction may and may not be right.

Let’s have a look at it in details.

YES, BUT…

So, USING the leverage at higher rates results in higher margin requirements and faster up or downswings of account equity.

You are able to buy or sell a much higher volume of a particular asset or instrument which exposes your account to significantly higher risk.

However – what makes you to use the full leverage you are offered by a broker?

… IT IS STILL JUST AN OPTION

You probably answered yourself very quickly – nothing and nobody makes you to buy 100, 200 or 500 times more than the buying power of your capital actually is.

Moreover, there are still other factors which influence your risk management, such as

  • Using StopLoss and placing the right level of it
  • Entering and exiting the market at the right moment
  • Number of positions and total volume respectively
  • Percentage of winning trades you made
  • Profit factor as a result of smart and responsible trading approach

CONCLUSION?

Yes, kindly use the advantages of being able to buy or sell more.

You will enjoy the benefits which Forex definitely brings to your investment portoflio.

The key point and my message is – do not over-leverage.

Trade disciplined. Trade long-term. Profit long-term.

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