The number one cause of death for newcomers to foreign exchange margin trading --- small capital with large leverage

Eastforexcashback 5Browse 0Comments Collection

Why small capital frequently crashes? How can the retailers small sampan withst forexcashbackcalculator the cr cashbackforexbtcis big waves? The small capital is said to be a large, limited capital to get unlimited profits, why the more waves counted, the more money counted less and less? The original leverage trading there are big questions according to the United States BABYPIPS foreign exchange school information, compiled for you this article, I hope to provide reference for leveraged trading enthusiasts   cashback forex $ 2000, do not open a standard East forex cashback, only $ 250, do not open a mini account no matter how the foreign exchange broker compelled you, you have to pretend to be deaf and dumb, not to be moved novice reason why The reason why newcomers fail is often because they dont have enough money to start with, or they dont really understand leverage Dont jump into the fire yourself before you figure it out!  Our recommended criteria are: if you have $100,000, only open a standard account, have $10,000, only open a mini account, have $1,000, only open a micro account (also known as a super mini account) If you only have $250, open a demo account, repeatedly practice until you earn a virtual profit of $750, then open a micro account You can not read the rest of this article, but to These words above, must bear in mind to be honest, we think, if you initially put less than $ 2000, then you might as well use a demo account to practice well, wait until you think you have enough ability to take out at least 2000 to do the initial try with no less than $ 5000 to start your foreign exchange margin trading, we think it is more appropriate  nbsp;Most newcomers in opening an account, only put very little capital, newcomers often do not really understand the meaning of leverage and margin, but also unclear how they affect the transaction must fully understand and attach great importance to leverage, if sloppy in this regard, I bet you and you, you will be violent position!  In this circle, there are some seemingly old but meaningful statements circulating, like leverage is a double-edged sword, or leverage in front of the two roads one leads to heaven, one leads to hell…… A) improper use of leverage exacerbates Eastforexcashbackes Lets take an example: you opened a mini account with $500, the trading unit is 10K The leverage ratio is 200:1 You do 2 lots (a total of 20K) EUR/USD, set a stop loss of 30 points, stop loss unfortunately hit, loss of $ 60 now $ 500 account loss of $ 60, equivalent to 12% ($ 60 loss / $ 500 account) so that the account only remaining $ 440 The first day of luck really back! The next day, you feel better and intend to get your capital back, so you double your position and buy 4 lots of EUR/USD, set a 30-point stop loss, but the nightmare repeats itself, and the stop-loss order is knocked off again, this time with a loss of $120 ($30 loss per lot, 4 lots totaling $120) Your account has lost 27% ($120 loss / $440 ), only $320 in your account now After two stop losses, you believe a favorable trend has unfolded, so you go long 2 lots of EUR/USD again and set a 30 pip stop loss... What a mess, a third stop loss! Another $60 accompanied!  So the account loss is close to 19% ($60 loss / $320) your account only $260 now You are frustrated, painful to think about, began to reflect, think the stop loss was set too tight The next day you decided to place 3 lots of EUR/USD long single, and relaxed the stop loss to 50 points luck back, drink a mouthful of cold water also plugged teeth, this transaction also Not ideal, your new long single looks to be finished…… but the result is even worse, because of insufficient margin, you were forced to close the position Your account only has $260 left, opened 3 lots of single, the amount of occupied margin is $150, so that the available margin is only a poor $110 when EUR/USD fell 37 points, because Insufficient margin, at the prevailing market price, you were forced to close your position Finally, the account was left with only $150, after the forced closing of the position, these occupied margin returned to your account after 4 transactions, the initial $500 in your account, only $150 loss of up to 70%!  The number of transactions initial amount trading lots stop loss points trading results final amount 1$500230-$60$440 2$440430-$120$320 3$320230-$60$260 4$260350 forced close $150 Indeed, technical analysis, fundamental analysis, creating systems, and trading ideas are important, but I believe that to be a successful trader, being thoughtful about your account and using reasonable leverage to manage your capital is what matters most!   (b) pay attention to the transaction costs of high leverage  in addition to magnifying your losses, leverage can also kill traders in another way the so-called slow knife cuts the meat, three years without realizing the death of traders slowly die, as we are exposed to high radiation environment… … most traders do not pay attention to the treacherous figure of the transaction costs, wait to pay attention to when the Traders have already fallen dead…… This killer is the cost of trading when using high leverage Suppose you open a mini account with an amount of $500 and a trading unit of 10K, you do 5 lots of GBP/USD long single with a spread of 5 points, so the total transaction cost is $25 (the cost of 1 lot is $5, 5 lots total 25 USD), which is equivalent to 5% of your account funds! The price has not changed, the account is 5% less! If you open a mini account, the trading spread is 5, the cost of opening a single lot is $5, then from the table below, we will see that the higher the leverage, the greater the relative transaction costs leverage required margin (MR) cost number of transaction costs, expressed as a margin percentage 200:$1$50$510% 100:$1$100$ 55% 50:$1$200$52.5% 33:$1$330$51.5% 20:$1$500$51% 10:$1$1,000$5.5% 5:$1$2,000$5.25% 3:$1$3,300$5.10%  1:$1$10,000$5.05%  So how should traders deal with this situation? One recommended method is to play it safe, step by step, and only do the market with a higher chance of winning, which will save on trading costs, while also reducing the losses incurred by transactions with a low chance of winning In addition, because of the moderation of trading, with the market fluctuations and from time to time worry about the state of mind will also improve, all in one fell swoop, why not?  The above talks about the leverage matters to pay attention to, the truly sensible trader, will be in awe of the market, have reasonable expectations of themselves and trading, constantly educating themselves and steadily moving forward Otherwise, we are facing death

Articles related to this article