Leverage/Forex

[expensif]

I'm a bit confused on trading FOREX with leverage.

If i trade with a leverage of say 100:1, i would trade $100,000 worth with only $1000, right?
Does this in turn mean that one tick up (or down!) would give me 100 times more profit (or loss!)?

Is my position stopped out if my trade goes against me when the loss amounts to the $1000 i invested
(in order to control the $100,000?

Or does the margin continuously change with the price of the forex, and then gets stopped out
when my account is empty? Or can it get even worse?


I could still use limit orders and stop loss in order to reduce risk?

 

[martin90]

Hi EXPENSIF

You are right in the first question at 1-100 $1000 would give you $100,000 exposure.
The margin moves with the trade, often you will get a margin call at double the margin(200-1)
My advise is never meet this. $1000 is your max loss, as if you don't meet the margin call the broker will close out the trade.

However if you trade with 100 leverage in my opinion, you will go broke. A 1% move wipes out your account

 

[martin brown]

expensif,

real pro-forex traders working in the city do not typically use more than 10 X leverage.

if you are new to forex, then it's 99% sure you will blow your account with 100 X leverage.

yes you can lose more than your initial capital.

stop limit orders do not reduce risk, if anything it increases risk due to the volitility of the forex markets which can gap straight though such an order leaving you with potentially unlimited losses.

you should read very carefully the terms & conditions of your broker/buckshop.

if you are new to forex trading, then i suggest you play with a demo account and only open a live account when you are consistantly profitable over several weeks.