Leverage in Forex - How to choose the right leverage

One of the factors that makes Forex attractive to traders is leverage. Many newcomers to the Forex market are not sure how to use leverage as well as choosing the right leverage level for their account. Let's find out.

What is Forex leverage?

The easiest, you can understand forex leverage as follows: You have $ 1000 in your account, with leverage of 1: 100 you can trade as if you have $ 100,000. So leverage Forex is a form of trading with a larger amount of money than you have, not limited by the amount of capital you own.

Example of 1: 100 leverage with $ 1000 account
Example of 1: 100 leverage with $ 1000 account

The leverage in forex market is the highest among other markets. Leverage is provided by the broker to investors as a loan. Depending on the broker, there are different levels of leverage. For example, at Exness leverage from 1: 2 to 1: unlimited; at ThinkMarkets from 1: 1 to 1: 500; at XM from 1: 1 to 1: 888.

How to use leverage appropriately

Leverage risk? Leverage like a double-edged sword. Increasing leverage can help you increase profits; However, it can also cause your account to lose faster and more. Therefore, you must consider carefully the level of leverage that applies to your account.

Risk of Forex leverage

A lot of traders now start with a small account but choose high leverage in the hope of earning a higher and faster return. As a result, they often lose money and feel depressed. There are 2 reasons for significant impact:
  • Firstly, choosing a high leverage has increased the risk of trading.
  • Secondly, it is psychologically: When the account is small, you tend to accept more losses. This makes it easier for you to break the rules of trading and become more reckless, determined to lose enough to the market.
What I would recommend here is choosing the right amount of capital and leverage. Candlestick Choose leverage how much Depending on the trader's experience, their ability to take risks.
However, manage your own risk by:
  • Consider using low leverage.
  • Place orders with small volumes.
  • Use trailing stop to minimize risk and preserve capital.
  • The stop loss limit is from 1% to 2% of the total account for each order.
About My name is Nguyen Manh Cuong. I was born in a poor village in Ba Vi district, HA NOI province - windy and sunny land. Currently. https://www.insurancefinances.com/. Mr Cuong.
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