The Problems With Leverage In a Live Currency Trading Environment
One of the most proclaimed benefits of trading in the foreign exchange market is the ability to trade with anywhere from double to 400 times your account balance using leverage. Most forex brokers may or may not realize that by offering this kind of excessive magnified buying power to an inexperienced trader, it is like giving them more rope to hang themselves with.Leveraging your money can be a great thing, but it can also lead to excessively risky trading. Certainly using leverage in any business context is the key to large profits, but at what cost are you willing to achieve this? Are you willing to risk over 20% of your forex account balance on a single trade? If you answered yes, then what you are doing is less like trading and more like gambling, and you will find that you will quickly join the over 95% of novice traders that end up running their account balance down to a margin call.One of the main pitfalls of trading a highly leveraged position is that a trader can be forced to exit the market at the worst time possible, thus preventing any chance of a market correction that can result in [...]
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Filed under Forex by on Dec 28th, 2008. 
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