Leverages, the higher the better?

Now that we have understood the basics of pips, lets get pippin to understanding leverages.

Rule of thumb, the lower your leverage the better. I'm not saying that you shouldn't take advantage of margins allowance but remember the higher you margin, the bigger the amount you can risk and what we want is not to allow you to get burnt out when you have just started to get a feel of things. Hell even the pros dun risk more than 2% and take advantage of lesser than 10:1 leverage.

This is how you should calculate your risk averse:

Lets assume our risk averse is target at 3% per trade. How do we position ourselves and setup a strategy to risk trade the correct amount of contracts without losing all our equity?

* Equity : 50,000
* Risk : 3% = 1500
* SL : 50 pips
* Pair : GBPUSD
* Lot : Standard
* 1 Pip = US$10 (Since the pair is a ***/USD)
* Stop = 50pips * US$1 = US$500
* Position Size = $1500 / $500 = 3 Standard lots
* True Leverage = (3*100000) : 100000 = 3:1

Remember if your true leverage goes above 10:1 then you are having serious MM issue, i will bet your account will burn out faster than a passing meteorite.

The rule does not change. The lower your risk the longer you stay in the game. In the very liquid market of forex trade , the only reason many are still trading is because we know how to control our losses. Making money is not even half the battle, controlling losses sets a pro trader and an amateur trader apart. read more you can input forex forum study .