new starter Q

[zbees]

i have 4 scenarios i need advice on:

scenario 1: say i open a new account with a forex broker and deposit $25. i then enter a position using all of that $25 x400 leverage so $10,000 on long USDCAD, 4 pip spread which is currently on par 1.00 (for this example), if it goes up to 1.014, (a 1% increase after spread), i exit the trade. what is my profit? - 25c or $100?

scenario 2: say i open a new account with a forex broker and deposit $25. i then enter a position using all of that $25 x400 leverage so $10,000 on long USDCAD, 4 pip spread which is currently on par 1.00 (for this example), if it goes down to 0.986, (a 1% decrease after spread), i exit the trade. what is my loss? - 25c or $100 (would i owe more than the initial $25 deposit)?

scenario 3: say i open a new account with a forex broker and deposit $50. i then enter a position using all of that $25 x400 leverage so $10,000 on long USDCAD, 4 pip spread which is currently on par 1.00 (for this example), if it goes up to 1.014, (a 1% increase after spread), i exit the trade. what is my profit? - 25c or $100?

scenario 4: say i open a new account with a forex broker and deposit $50. i then enter a position using all of that $25 x400 leverage so $10,000 on long USDCAD, 4 pip spread which is currently on par 1.00 (for this example), if it goes down to 0.986, (a 1% decrease after spread), i exit the trade. what is my loss? - 25c or $100 (would i owe more than the initial deposit)?

with all of these 4 scenarios are there any other costs involved? margin calls, interest payments, holding a position overnight/weekend costs etc.?

 

[zbees]

bump

 

[virtuos0]

i have 4 scenarios i need advice on:

scenario 1: say i open a new account with a forex broker and deposit $25. i then enter a position using all of that $25 x400 leverage so $10,000 on long USDCAD, 4 pip spread which is currently on par 1.00 (for this example), if it goes up to 1.014, (a 1% increase after spread), i exit the trade. what is my profit? - 25c or $100?

scenario 2: say i open a new account with a forex broker and deposit $25. i then enter a position using all of that $25 x400 leverage so $10,000 on long USDCAD, 4 pip spread which is currently on par 1.00 (for this example), if it goes down to 0.986, (a 1% decrease after spread), i exit the trade. what is my loss? - 25c or $100 (would i owe more than the initial $25 deposit)?

scenario 3: say i open a new account with a forex broker and deposit $50. i then enter a position using all of that $25 x400 leverage so $10,000 on long USDCAD, 4 pip spread which is currently on par 1.00 (for this example), if it goes up to 1.014, (a 1% increase after spread), i exit the trade. what is my profit? - 25c or $100?

scenario 4: say i open a new account with a forex broker and deposit $50. i then enter a position using all of that $25 x400 leverage so $10,000 on long USDCAD, 4 pip spread which is currently on par 1.00 (for this example), if it goes down to 0.986, (a 1% decrease after spread), i exit the trade. what is my loss? - 25c or $100 (would i owe more than the initial deposit)?

with all of these 4 scenarios are there any other costs involved? margin calls, interest payments, holding a position overnight/weekend costs etc.?

Forget this 400 leverage crap, that amount of leverage is for suckers. It's offered by brokers who only want their clients to get wiped out, by trading in too large a volume for their account and therefore having no risk management. Look at the better brokers and they won't offer you that, say for example Oanda which offers upto 50x and even better Interactive Brokers which offers 40x.

Set up a demo account (FXgame) on Oanda, and the answers to all your questions will become obvious. Oanda provides calculators to work out margin, unit size etc

 

[virtuos0]

..oh and also worth mentioning is that Oanda don't have a lower limit on account size, so if you wanted you could even trade live with a tiny account, which may be worth doing as you learn a little more about the psychology of losing/winning money.

I don't have any connection to Oanda by the way, I'm not pimping them for personal gain!

 

[Rhody Trader]

scenario 1: You make or lose based on the value of the position you trade. A 1% move on a $10,000 position means $100 profit.

scenario 2: You would get margin called, probably at a $12.50 account balance (but check with your broker to confirm as there are differences among them as to how they handle that)

scenario 3: see 1 above

scenario 4: see 2 above

Interest carry and/or rollover are potential costs.

 

[zbees]

thanks for the replys. what is bad about 400x leverage if you use a stop loss so you cant lose more than the initial deposit. by the way what do u think of the following brokers:
IG Markets
Go Markets
eToro

 

[virtuos0]

Nothing is intrinsically 'bad' about it, only that it will tempt you to enter positions that are not sensible in terms of risk management.

High leverage will tempt you into entering very large positions with small accounts. For example if you have 400x leverage you COULD trade at a position size of 1 lot (100,000 units of the base currency) with say a 1k account. Rules of good risk management are that you should risk no more than 1% or 2% of your account on each individual trade (in other words if you stop loss was hit you would lose a max of 1% of your account. Now if you were trading at 1lot and your stop loss was a mere 10pips away how much of your, account would you lose? You would lose roughly 10% of your account in ONE trade! With sensible leverage limits this kind of nonsense is not even an option, it forces you to stay within sensible limits, and you might even be able to stay in the game long enough to make a profit!

I haven't used any of those brokers you mention, you could try asking in the forex brokers forum.

 

[disi]

thanks for the replys. what is bad about 400x leverage if you use a stop loss so you cant lose more than the initial deposit. by the way what do u think of the following brokers:
IG Markets
Go Markets
eToro

The higher leverage the faster you lose. I will tell you secret of 'big guys' -they all use as small leverage as possible It's someting completely different to what newbies think is the 'right thing' to do.