Would you consider taking out a $50,000 loan against your home in order to finance a gambling trip to Las Vegas? Of course not, and yet when you leverage your Forex trades that is essentially what you are doing; borrowing money at a risk that you won’t be able to afford to pay it back.
What Does Leveraging Your Trade Mean?
On the surface, leveraging looks like a good idea. Most brokers will allow you to borrow from them to make a trade, usually with a small percentage down. Let’s say yours will require 1%. This means that for every $1,000 in your account, you potentially could trade with $10,000. Leverage has nothing to do with changing your chances of a successful trade, it just means you are able to invest more into it then what is in your Forex account.
How Can Leverage Help?
Forex trading is measured in pips, which are actually fractions of a cent. In some cases, a gain of 100 pips may only equal one dollar. Continue reading "Letting Go of Your Leverage: Why Slow and Steady Works Better With FX Trading"