Here's trading myth: high leverage is bad for you! You see this idea in every futures/forex forums over and over again.

That is of course complete nonsense and this is the reason.

Every time you start a 100 to 1 (or longer ) leverage stake in a forex mini-account, your favorable forex dealer is only saying this: Hey Mr. Trader, just put $100 on your account plus cost of disperse and I will let own $10,000 worth of currency, and if the market moves just 1% in your favor you earn 100% profit on your margin money, less price of spread along with a possible little interest!

This high-leverage-is-bad myth is based on a very simple confusion the majority of traders, newbies (and some experts alike!) Assume that leverage means your whole trading equilibrium divided by the value of your position.

Your trading equilibrium has of course NOTHING related to leverage!

It does not matter if your trading equilibrium is $1,000,000 or $100, if you start a stake and you just want $50 to own/control $10,000 worth of currency then you're trading using a 200:1 leverage, period.

So high or low leverage, it doesn't make a difference. HOWEVER, what is really, really important is the percent. If you open a forex position and you need $5000 margin money and that margin money represents 100% of your trading balance then Houston we've got a problem no doubts about that.

In fact, if a trader has an superb forex trading platform, then the best course of action is to choose the highest leverage possible (400:1), to allow for a quick compounding of profits.


PS: this thread is NOT an invitation to exchange using higher/lower leverage, as always trade at your own risk.