new to trading + leverage and other questions

November 23rd, 2013, 02:35 PM

Hi

I've been a member on this forum for a couple of weeks now. In the meanwhile i've set up a demo account to try some things out. for the moment i've just been trying things out with moving averages.
I thought about starting to trade in forex. why? you don't need too much initial investment to start trading here and the markets are open for longer.
For this I have question about leverage. my broker account allows me to have 1:200 leverage.
I was wondering the following situation: let's say I invest 500$ which allows me to have a 100 000$ investment. the currency I buy is worth 1. the price drops to 0,8. Would this mean I will also lose 20 000$? What if i would only have 500$ in my account?

I also have some other questions:

- Where do you find your info, how did you start learning to trade?
- would you recommend me something to read?
- if anyone would be up for it I would like to talk to someone about his/her trading experience. we could chat, skype,...

I've also found the webinars and I watched the first one for the newbies (saw this in a post by mike) but I can't find the other ones:

1) instruments and brokers (watched)
2) trading platforms
3) developing a trading style/method
4) goals and best measurement practices
5) indicators, signals and automation

thanks , and i'm really looking forward to learn a lot about trading on this forum

November 23rd, 2013, 03:08 PM

Hello Jens, Welcome.

I would be happy to speak to you. I do not leave my skype on all the time. I have been trying to trade for a couple of years. mixed success. I live in the US and speak English.

If you click on my name and look at my posts you will find one under Big Mikes "Simple directional trading profitable," that gives you an idea of where I am.

As for your question about leverage. The example you give illustrates the reason you should not over leverage. In that example, the broker would have closed out your trade long before you reached that loss. They will close your position when they think there is a risk that your account will go to zero. In the US, if they make a mistake and your account goes negative, you must pay them the difference. It says so clearly in the documents that you sign when you open the account. There is no need for 200/1 leverage. Even 50 to 1 is plenty.

Especially for a beginning trader but even many pro traders, risk only 1% of their account. a reasonable goal for a trade is 2 times risk. so $10,000 account, 1% = $100 to make $200. There are many instruments you could use to trade at this level. The point is this. It is not the leverage that matters. Do you know before you execute a trade, how much of your account you are risking? Do you know what return you are expecting. Does it make sense. If you have a record of being correct 50% of the time then your winners need to be bigger than your losers by some amount. if you are correct 80% of the time then you winners could be smaller than your losers. all else being equal, a bigger stop loss gives you a higher winning percentage but a poorer risk to reward ratio.

If you want to skype, let me know and I will PM my skype name.

Archie

November 23rd, 2013, 03:24 PM

many thanks. I will send you a pm now. I tried earlier but i see you need 5 posts at least

new to trading + leverage and other questions

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new to trading + leverage and other questions