Are the days of high leverage over? - page 4
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Some brokers offer 1:1000 on micro, and 1:500 on their regular accounts, but I have seen some also offers like 1:3000 which seems bit unreal. For any trader, I suggest keeping the leverage low at first to get used to the market as higher leverage might lead to higher damages.
Must admit that I find this conversation rather disturbing so, let me try explain my own approach.
Firstly, when the govt interferes, it is ALWAYS and foremost to protect themselves - their taxbase.
As such, lowering the leverage (deposit percentage required per trade) is NOT an attempt to protect the trader but rather to protect the BANK. This is because, the amount of tax you pay is neglitable in comparison to what the bank (is supposed to) pay.
In fact - a lower leverage is to the detrement of the trader. As an example, I always try find the highest leverage I can and currently, am trading at 1000 leverage. However - some of the traders in my trading group trade with 400 and even 200 leverage. They follow my trades exactly using some trade copier and, they are supposed to risk (on balance) according to their leverage.
In other words - the trader on 200 leverage should take around 20% the risk I take in my own account. But - such a trader then will take around 5 months to gain the profit I typically make in 1 month.
Naturally, over time, there is a temptation to take higher risk (because they hear about my income daily) and so it was that last month one of my traders (on 200 leverage) had a risk percentage exactly the same as mine. About middle of last month I suddenly had a 40% drawdown in my account before the market finally turned around, came my way and I had a rather nice profit. However - the trader on 200 leverage had a margin call and lost the account.
My point with the above is - lower leverage acutally means that you need to pay a higher deposit (called margin in forex) on any particular trade. As such, the risk of your business ending with a cashflow problem becomes significantly larger. As we all know - many a business go under because of a cashflow problem. Same rules apply in forex.
Must admit that I find this conversation rather disturbing so, let me try explain my own approach.
Firstly, when the govt interferes, it is ALWAYS and foremost to protect themselves - their taxbase.
As such, lowering the leverage (deposit percentage required per trade) is NOT an attempt to protect the trader but rather to protect the BANK. This is because, the amount of tax you pay is neglitable in comparison to what the bank (is supposed to) pay.
In fact - a lower leverage is to the detrement of the trader. As an example, I always try find the highest leverage I can and currently, am trading at 1000 leverage. However - some of the traders in my trading group trade with 400 and even 200 leverage. They follow my trades exactly using some trade copier and, they are supposed to risk (on balance) according to their leverage.
In other words - the trader on 200 leverage should take around 20% the risk I take in my own account. But - such a trader then will take around 5 months to gain the profit I typically make in 1 month.
Naturally, over time, there is a temptation to take higher risk (because they hear about my income daily) and so it was that last month one of my traders (on 200 leverage) had a risk percentage exactly the same as mine. About middle of last month I suddenly had a 40% drawdown in my account before the market finally turned around, came my way and I had a rather nice profit. However - the trader on 200 leverage had a margin call and lost the account.
My point with the above is - lower leverage acutally means that you need to pay a higher deposit (called margin in forex) on any particular trade. As such, the risk of your business ending with a cashflow problem becomes significantly larger. As we all know - many a business go under because of a cashflow problem. Same rules apply in forex.
Margin is your smallest problem
And I believe that with leverage 1000 compared to leverage 200 your account 1000 was long gone if the conditions were the same