The most important chart for trading - page 6
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And you should also ask him if any spot has leverage ;). And at the same time whether there is/could be live delivery in the margin market ;) ))))))).
By the way, spot is making a transaction with an agreed date of delivery of the asset, spot standard => T +2 days - which is why the Wednesday to Thursday swap is double ;). Unlike the same forwards/futures.
The standard settlement timeframe for foreign exchange spot transactions is T + 2 days; i.e., two business days from the trade date. Notable exceptions are USD/CAD, USD/TRY, USD/PHP, USD/RUB, USD/KZT and USD/PKR currency pairs, which settle at T + 1.
2Sergiy Podolyak you absolutely in vain do not try to understand what Dina tells you.
Since it seems that you operate more emotionally than mathematically, I will try to translate your statement into civil language: You say that a car with a more powerful engine and a speedometer marked at 300 km/hour is more dangerous to drive on public roads than a car with a less powerful engine and a speedometer marked at 180 km/hour, all other conditions being equal. In return, you are told that the danger is in the pad between a steering wheel and a seat, and that one should choose the speed depending on road conditions, not the maximum speed marked on a speedometer.
By the way, it doesn't matter at all how many amateurish opinions you cite to support your point )))) - It only shows how far removed you are from the subject matter.
You're wasting your energy...
The whole point of the topic starter's thought is that if you trade the entire depot on every trade, then with a lot of leverage you'll lose faster than with a little leverage.
Yes, cap.
Of course, these charts are not a risk manager.
A risk manager is not a risk manager because his calculation depends mainly on mathematical expectations.
The argument about leverage can be summarised as follows.
Leverage is, in my opinion, nothing more than a certain ratio of your equity to the share of the broker's funds that you spend on your trade.
Therefore, the higher the leverage, the higher the risk of losing funds, hopefully for obvious reasons. Leverage also allows you to trade with a smaller investment at someone else's expense essentially, simply put if you have almost no funds)))
So, I suggest using a risk manager that will fit the strategy and forget about these screenshots and links because there is nothing amazing and necessary for a trader in them, although when you first got acquainted with them you were hooked.
You're wasting your energy...
The whole point of the topic starter's thought is that if you trade the entire depot on every trade, then with a lot of leverage you'll lose faster than with a little leverage.
Yes, cap.
That's true, but the point is that the size of the leverage is indirectly involved. The reason is that with a bigger leverage, the trader will be able to open with more volume if he opens with all available saisings. Correspondingly, the pip value will be higher and the number of points against the open position that the deposit will be able to withstand before the free margin is exhausted will be lower. Accordingly, stop-out and margin call occur earlier.
The statement in TC's initial post is absolute - i.e. more leverage === more risk. Actually, that's what he disagrees with.
Basis for risk management is point value and free margin and it depends on the leverage only at extremes, but no one forces the trader to open every time to the maximum site, just as no one forces the driver to constantly accelerate to the stop in the car ))))))).
With proper risk management (RM) the leverage size can even increase the chances of making money. Example (theoretical, but very real): with the same trading strategy, an account with higher leverage can tolerate either more price movement against an open position, because more free margin is left after the position is opened, or more losing trades in a row. In the case of a highly leveraged account with a sensible money management it is possible to withstand a larger drawdown, with the possibility of continuing the trade. If one trades responsibly, the same trading system may appear in such conditions that, in one case, there are not enough funds to continue the trade and a series of losing trades will simply stop it. And, in the other case (with a bigger leverage and keeping the MM) there are enough funds for passing a series of losing trades and then the deposit is restored on profitable trades.
That is, the statement that increasing the leverage unambiguously leads to increasing risks in trading is not true. Breaching MM/RM rules leads to the increase of risk in trading.
That is what this speech is about. )))))))
Of course, these charts are not a risk manager.
A risk manager is not a risk manager because his calculation depends mainly on mathematical expectations.
I suggest that the argument about leverage can be summarised as follows.
1. The leverage is nothing more in my opinion than a certain ratio of your capital to the share of the broker's funds that you spend on your trade.
2. Therefore, the higher the leverage, the higher the risk of losing funds, hopefully for obvious reasons. Leverage also allows you to trade with a smaller investment at someone else's expense essentially, simply put if you have almost no funds)))
3. So, I suggest using a risk manager that will fit the strategy and forget about these screenshots and links as there is nothing amazing and necessary for a trader in them, although when you first got acquainted with them you were hooked.
Well, the definition of leverage/leverage is actually there. And you are right in that it is a collateral that is fixed in the trader's account and does not participate in the calculation of the free margin required to maintain an open position.
The second statement on the other hand, IMHO, is debatable. More correct, I think, is this: More leverage gives more opportunities for the trader to increase trading risks.
But whether or not the trader will increase the risks depends on the trader. )))))))
The third point is true - RM/MM is chosen specifically for the strategy, not in the abstract.
I caught myself at the time, staring quietly at the monitor.
You were like clean air and a warm light to me, after the claims of the author of the topic.
You, and other old-timers of good form, are less and less often "seen" on the forum.
But perhaps it's natural. And it's a pity. Though it is understandable.
P./S.: Your succinct example:
The basis for risk management is point value and free margin and they only depend on leverage at extremes, but no one is forcing a trader to open every time for maximum saiz, just like no one is forcing a driver to constantly push the gas to the limit in the auto )))))))
With proper risk management (RM) the leverage size can even increase the chances of making money. Example (theoretical, but very real): with the same trading strategy, an account with higher leverage can tolerate either more price movement against an open position because more free margin is left after the position is opened, or more losing trades in a row. In the case of a highly leveraged account with a sensible money management it is possible to withstand a larger drawdown, with the possibility of continuing the trade. If trading is managed correctly, the same trading system may turn out to be in such a situation when, in one case, there is not enough money to continue the trade and a series of losing trades will simply stop it. In the other case (with a bigger leverage and keeping the MM) there is enough money to go through a losing series and then the deposit is restored on profitable trades.
That is, the statement that more leverage unambiguously leads to more risk in trading is not true. It is the violation of MM/RM rules that leads to increased risk in trading.
And a brief, clear example at the beginning of the topic, given by Aleksey Kozitsyn .
And statements of the author of the topic (they reminded me very muchof new_rena's statements in another thread), led to the fact that being in my thoughts, I drew a small scheme.
In general, I will now give it and tables (one table in the next post, another in the next), as a kind of uncomplicated illustration of the examples voiced.
Among other things, you can see that with less leverage, there may be more risk than with more leverage.
Before adding the table and the scheme I was mentioning when I paid my respects toVladyslav Goshkov(without this information it looks like I'm writing about a reference book), I should also mention that different formulas for calculating the amount of margin for opening a trade position can be found in the MQL5 Reference. They are there - in the table describingthe ENUM_SYMBOL_CALC_MODE.
For FOREX (all below mentioned applies to FOREX trading), it is
Identifier
Description
Formula
SYMBOL_CALC_MODE_FOREX
Forex mode - calculation of profit and margin for Forex
Margin: Lots*Contract_Size/Leverage
Profit: (close_price-open_price)*Contract_Size*Lots
I.e., it is clear that leverage is not involved in the profit/loss calculation.
I would also like to express my opinion about the following:
I think the fear of leverage is contributed by the very name:leverage.
It is likely that for someone unfamiliar with them, this word combination may involuntarily cause associations with some kind of monetary credit (such as that given in banks or other places).
Shoulders, though, are something else.
And the numbers about leverage: 1:5, 1:10, 1:50, 1:100, 1:200 (and others), if you are not familiar with them, might make you think it means something scary.
Whereas (as you can see not only when trading with real money, but also when trading on demo):
So, ok. I pass to the table and figure-scheme, uncomplicated illustrating that scares about the leverage are not often far-fetched.
Initial data is as follows:
Just in case, I will mention that I took theMarginCall and StopOutlevels as the first ones I saw. That is,not on the basis of "best-best". The lot size is the minimum one I know.
In the table - this is what interest and the amount of margin, margin call and stop out would be, based on the above conditions and different sizes of leverage:
By the way, if you have (or have left) on your account $1000 with 1:1 leverage, this maynot be enough to open a trading position (<green font - these are additions and clarifications made later)with a minimum lot, because the mark (rate) of a currency pair can be above 1.00000. For example, at the time of writing this post EUR/USD was at 1.0698
Data from the table in schematic form:
Added: one cell of the bars in the chart at 1:1 leverage equals $10. One cell of bars with leverage higher in the diagram, equals 1$ (I will add it to the diagram and re-cross it now).
Added: finishedand re-stitched.
This chart clearly shows uncommitted funds, margin and stop out levels, depending on the size of leverage.
In addition, it shows that leverage size does not increase a trader's trading account.
It also shows that the trading funds a trader can operate with are limited by the listed amount and the stop out level.
And, among other things, it shows that greater leverage can allow carrying less risk. For example, leverage can help to:
In addition, broker forcibly closes the trade to trader, whenthe balance on the trader's accountdecreases (falls) toStopOut level. **From the diagram, the stop out levels at different size of the leverage are marked in red */.
If you trade with a larger lot size than0.01, the margin increases. Both profit and loss increase (the point value is higher than with a smaller lot).
In the next post I will give the same table as above, but with a lot size equal to0.10.
Without any long accompanying descriptions.
Same table as above, but with lot =0.10. /*previous table and chart - with lot size =0.01*/.
Accordingly, one pip profit/loss (the fifth at five-digit quotes) will equal $0.10 already. The fourth point in five- and four-digit quotes =1$:
I did not draw a picture for this table.
Completed: No, I finally decided to do it and attached the image. It looks identical to the figure above. The only difference is that the figure below
That is, to scale.
But that's basically what the tables compare, since the first table is about a 0.01 lot, and the table in this post and in the figure below is about a0.10 lot size (all other things being equal)
Added: Replaced the previously attached chart in this post, because its header did not correct the values of one four-digit and five-digit profit/loss points. I copied it from scheme with 0.01 lot and did not notice that I did not corrected cost of one pip in its header (in the beginning of my post I wrote about cost of pips with 0.10 lot, but in scheme header...). Sorry.
P./S.: Just in case, I would like to mention that calculations for real application can be done by searching on the Internet using the word combination:trader's calculator
Depending on various factors, they may be different. For example: lot size, financial instrument, its mark (exchange rate), contract size, account currency, trade direction, amount of money on the account, amount of leverage (in terms of calculating the margin amount). Something like this.
Taking into consideration and using of different factors - it largely depends on the trader.
Exaggerations about the dangers of leverage, and inconsistent with factual fiction regarding them, is, imho, the way to:
In general, of things not conducive to optimism.
Something like this.
And, among other things, it shows that greater leverage can allow for less risk. For example, leverage can help to:
This is another nonsense disguised by half-truths.
And as we know, half-truths are worse than lies (folk wisdom).
Deena deliberately didn't show the risk at different shoulders. It would have been enough to show another column of change in equity (in % of position margin) when the price of an asset changes by 1% - and everything would have been immediately clear. Any honest person who has completed 7th grade in high school would have done so. But Dina has not. So she is the only smart one, and the international Basel Accords and leverage limitation regulations are nonsense according to Deena. And the American laws and the Dodd-Frank law limiting the leverage for Forex to 1:50, according to Deena, is nonsense, they're all idiots on Wall Street there.
Even CNBC's website specifically explains the dangers of leverage to the common people:
http://www.cnbc.com/2015/01/16/forex-leverage-how-it-works-why-its-dangerous.html
Even the most popular simple Investopedia website explains the dangers of leverage clearly and on their fingers:
http://www.investopedia.com/articles/forex/092115/how-much-leverage-right-you-forex-trades.asp
But Dina stubbornly talks gibberish and only sees the comfort side of leverage and sort of fails to see the danger of increased risk in using leverage.
Leverage is a BOTTOM sword.