Leverage is the advantage that allows the traders in the market to place big trades with their small accounts. Many people thanks Forex for giving them the opportunity of using leverage, but you need to know, there is nothing offered to the traders which are not profitable to the broker. This market is economical and money is the only relation between you and your broker. If you lost your money the broker will not know you and when you invest a lot of money, the broker will shower you with different kinds of Forex bonuses. Most traders think leverage give them the choice to make big trades like the professional traders in the market but without knowing what you are doing in the market, you can destroy your account in Forex. If not destroy, it will lower your profit.
This article is very important to traders who are thinking to use leverage in their trading. If you look at the professional traders, they also like not to use the leverage. This market is risks and there are no risks in using leverage to make more profit. As a currency trader if you don’t learn the percent way to use the leverage then you will lose money seamlessly. Always follow money management plan regardless of the quality of your trading signal. This is often considered as the Holy Grail in forex trading industry.
You are always welcome to take the low leverage if you are interested. But most traders always try to trade big with a high leverage. Have you ever wondered the difference between taking a high leverage and low leverage? If not then just study the professional and the novice trader. You will notice that most of the novice traders are using high leverage online trading account. On the contrary, the expert is taking low leverage while placing their trade. However, there is some professional scalper who takes a high level of leverage in trading since they know the advanced way of managing their risk.
The difference is like driving a car at slow speed and at fast speed. If you are driving a car at 80 miles per hour, a slight steering may not land you in the fields. You will only experience a movement in the car direction. If you are driving at 150 miles per hour, a slight turning may end your lives. You will have no chance of getting back on the road and you will hit the field.
When you were looking for a perfect broker to open your account with, do you remember how proudly they announced their high leverage? It is not because they are feeling happy or they like to help their customers. It is because it is a marketing policy. Luring the customers by showing attractive leverage is an old trick and many greedy customers fell for it. Do not think leverage will give you an upper hand in Forex, it will only turn down your profit.
If you want to trade with big lot size or high leverage then you need to learn the perfect way to use a tight stop loss. The novice traders in the financial industry always trade the market without any precise stop loss. But this market is one the most dangerous place for the investor’s community. You need to learn price action trading strategy since it will allow you to trade with precise stop loss. Instead of using a random number as your stop loss you need to use rational logic.
Summary: Trading is one of the most sophisticated arts in the world of finance. To make profit consistently you need to focus on many factors. Always trade with proper risk management plan and use your leverage in an efficient way. Never try to win big trades as it will cause you big loss.