having trouble understading leverage

adriandecleir1

Junior member
15 0
Hi, I know this is really really basic stuff, but im having trouble understanding one of the obvious first things you should learn when getting into trading and thats leverage.

Please dont get me wrong, i have been studying charts for months, reading books about price action and money management, ive been trying a system using a demo account that seems to be just about profitable so far(im sure with more knowledge this may improve over time) yet this simple concept of leverage goes over my head.

I have watched this video but still cant see how it applies to me.
I use alpari uk, I have a demo account and trade .01 lots in the main currency pairs, which means 10c /pip for eurusd(for example), where does my leverage 1:500 come into this, what would be the difference in this particular example if it was 1:250

What am I missing here?

Thanks for the help
 

adriandecleir1

Junior member
15 0
ok i found another video directly related to my situation, now i finally get it,
, more leverage means less deposit required. I dont think it matters at all if you're sticking to a 2% risk /trade
 

Rhody Trader

Senior member
2,620 264
I use alpari uk, I have a demo account and trade .01 lots in the main currency pairs, which means 10c /pip for eurusd(for example), where does my leverage 1:500 come into this, what would be the difference in this particular example if it was 1:250
The only thing leverage has anything to do with that you should concern yourself with is determining how big you can trade. That's it. If your maximum permissible account leverage is 100:1 then you know you can trade up to 100x the size of your account balance. That's all you need to know. It's all that matters. Any other fretting about leverage is really a waste of time.

Trade position sizes that conform to your risk management rules and so long as you don't bump up against your limits you'll never even think about leverage.
 

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