One of the main things which attract people to the Forex market is the high leverage which brokers offer Forex traders. Indeed, Forex leverage can offer substantial profits, yet using too big a leverage can also act against you and cause bigger losses to accumulate in a hurry.
How does Forex leverage work?
For instance, if you place a $500 deposit and are offered a 100:1 leverage, you can open trades of $50,000. This means that if the currency pair which you’ve chosen rises by 1%, you earn $500, or a 100% return on your investment. This is a huge return and can happen within a day or 2. Huge, right?
However, Forex leverage also has it’s own special risks as well. Take the same example of a 100:1 leverage on a $500 deposit and let’s say that your currency pair shifted 0.5% in the wrong direction. This means that you lost $250. That’s right, half of the money you put in, a loss of 50% in one trade.
So, you see, selecting how big a Forex leverage you choose is an important decision which can literally make or break your trading experience. Just imagine a new trader trying a 100:1 leverage and end up losing his or her entire deposit on a 1% shift in the wrong direction. It’s one of the reasons people think the Forex market is so risky. They lose their deposit in their first trade and are so turned off that they never try again.
If you’re new, go for much smaller leverage levels. I recommend not going over 10:1 levels. If your position rises by 1% you gain a 10% return, which is still amazing. But if you lose, than only 10% of the deposit is gone and you have a lot more to work with and earn it back in future trades.
One of the key rules of Forex risk management is to choose a leverage lever which you can handle. If your deposit constitutes a large part of your finances, than choose a lower leverage 5:1 for example. Don’t be tempted by tales of huge forex gains at 500:1 leverage. Most of the people only tell about their winning, not about their losses.
Forex trading is a long term enterprise. Don’t allow yourself to be thrown out of the game by making one bad trade at a huge leverage.
By: John J. Drummond
Posts Tagged ‘Imagine’
Forex Trading Leverage Rules – Forex Risk Management Guidelines
March 2nd, 2010Forex For the People – A Tale About the Forex Autopilot System
February 7th, 2010
No one could imagine everyone being an expert in forex trading, but I bet everyone would like to be one, or at least get a piece of what a good trading operation can deliver for one’s personal finances.
I am no expert in forex trading, however, a few months ago I decided to begin learning a thing or two about the subject and started trading by myself online. I did very well (or at least I thought so) because over the last few months I was getting a 6% return which is extremely good considering the lousy returns you get on a bank CD.
But since I was not investing millions at a time, I was making some good money but not as much as I wanted. That lead me to try one of those Hyips, something that thankfully went well from the beginning to the end, but never gave me peace of mind, so after a very good profit I decided I would leave it there and withdrew my money.
However, I still remained eager to place my money on something that would put it to work, so I decided to research a little bit about the so called trading robots. As you imagine, I found a lot of information about several forex systems and they all had the funniest names like assassin, killer, blade, you name it.
However, after going through many forums and reviews I narrowed down my search to a couple of systems:
Forex Autopilot System; and Forex Killer
Both of these systems had a rather good name in the field, but I remained a bit undecided about which one would be best to try. I kept looking for information until landed on a website that reviewed three money making systems; two were about internet marketing and one of them was about forex (Forex Autopilot System). After reading the review I liked the fact that the system was not some guide you have to follow in order to achieve any given result, but it was actually a software that you would install in your computer and from there, it would start trading all by itself 24 hours per day.
I visited their website and read all that they had to say. After doing that I felt it was worth giving it a shot, because among other things they offered an 8 week money back guarantee, and this is the kind of thing that you have to see with you own eyes in order to make your own mind.
I downloaded the program, and I carefully read and followed all the instructions provided (which I advise you to do). I downloaded the trading platform from one of the recommended online brokers and inserted the program within the platform. Then I opened a paper money account and started testing the robot and went to bed (I let it running all night). Well by 9 a.m. when I woke up the little guy had made 6 trades for a profit of $120 with a paper money account of $3,000. I was very excited, but still I did not go crazy depositing real money; instead I waited and observed for another day.
During the day the little guy made 9 new trades for a $180. I was blown away and I kept thinking this is unbelievable, but still I let it run through the night again to see what happened. Well, by the next morning, the Forex Autopilot System had made another 6 trades for a $120 profits. That means that in just 2 days the little guy had pulled a profit of $420, that is a 14% return in 2 days!
Multiply that for about 240 business days of the year and we are talking about a 1680% yield per year! Of course, the creators of the Forex Autopilot System warn you that the little guy can have bad days, but overall it will deliver 96% winning trades.
After two days with paper money I decided it was time to go for the real thing and I deposited $500 for the Forex Autopilot System to managa. Well, I am about to finish my first 30 day period with real money managed by the Forex Autopilot System and the current balance in my trading account is $1200 and growing. The Forex Autopilot System has gotten all the trades right, and up to this date I have not seen the first loss.
This is by far the most impressive encounter I have had with any business opportunity or whatever you would like to call it. Forex Autopilot System really delivers a result you will only believe if you see it with your own eyes, and I strongly advise you do so. This is the kind of thing one usually rejects because it is too good to be true, but for once truth turned out to be as good as it sounds. Get your hands on this software, I personally guarantee you will not regret it.
By: Alex Cadens
