Forex Startup Questions, Leverage S/L Margin etc

[ULTIMATEONE]

Hey

Just got a couple of questions regarding the FOREX.

I'm aware you need to buy in 'lots' such as micro (1000), mini and standard (names vary).

Now I want to make sure I understand that for example,

I am using a micro account and trade in 1,000's.

So I BUY EUR/USD @ 1.5 @ 1,000 = 1500 Worth
The broker uses a 200:1 leverage, meaning for that £1,000 lot, it has taken a £5 margin.

Question1: Does this mean that my stop loss is at £5? I heard that the margin is a double edged sword and the reason is because it automatically shuts off if it reaches the margin?

What is the best leverage to use? Higher or lower? (100:1 or 500:1) If my question is correct (cutting off) I'd guess its best to use the least leverage as possible?!

If so how do people actually trade then if the leverage sets a margin factor which is so 'harsh'?

Thanks for reading, I look forward to your replies!!

 

[ULTIMATEONE]

30 people looked and no comment? Please help guys!

 

[Scotty2Cues]

Hey

Just got a couple of questions regarding the FOREX.

I'm aware you need to buy in 'lots' such as micro (1000), mini and standard (names vary).

Now I want to make sure I understand that for example,

I am using a micro account and trade in 1,000's.

So I BUY EUR/USD @ 1.5 @ 1,000 = 1500 Worth
The broker uses a 200:1 leverage, meaning for that £1,000 lot, it has taken a £5 margin.

Question1: Does this mean that my stop loss is at £5? I heard that the margin is a double edged sword and the reason is because it automatically shuts off if it reaches the margin?

What is the best leverage to use? Higher or lower? (100:1 or 500:1) If my question is correct (cutting off) I'd guess its best to use the least leverage as possible?!

If so how do people actually trade then if the leverage sets a margin factor which is so 'harsh'?

Thanks for reading, I look forward to your replies!!

if you buy 1000 eur/usd @1.5, you simulataneously buy euro and sell usd. If your using 100:1 leverage (I'm a beginner and wouldnt use more than 10:1) then your magin is 1%, you need 1% of your position in your account. I found this extremely useful http://www.babypips.com/school/

 

[Scotty2Cues]

you also havent bought 1500 euros, you bought 1000 euros and sold 1500 usd.

If the rate went to 2.0 and you then sell your 1000 euros (buying usd at the same time) you get 2000 usd back so $500 profit.

 

[ha0dho]

Baby pips also has a position size calculator could be usefull for u

http://www.babypips.com/tools/forex-calculators/positionsize.php