Choosing The Right Leverage For Your Trades

You want so much leverage that next to the word "margin" in the dictionary, there is a picture of you

You want the maximum leverage.

You want so much leverage that you are literally crapping leverage if you so much as bend your knees. You want so much leverage that next to the word “margin” in the dictionary, there is a picture of you wearing a three hundred karat diamond-crusted gold chain around your neck, surrounded by lingerie models.

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Here’s why.

When you open an fx trade, you put down margin. And whatever is left in your account is “usable margin.” I love usable margin. Some guys watch porn. I just close my eyes and think about usable margin.

What’s So Special About Usable Margin?

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It’s the room my trade needs to be successful. It’s margin I can use to take more trades. It’s breathing space for my trades. I want the most breathing space possible. I want to be able to open more trades. I don’t want to have to put a down payment of half my account just to open a trade.

The regulatory agencies don’t like you to have margin. They don’t trust you. I trust you.

And another thing: If you are starting out in forex, and you want to build a small account into something bigger, you are going to need margin. It is popular to say “Oh my god you are going to blow up your account if you use too much margin.” But the truth is that you are smart enough not to blow up your account. You are not an idiot. Anyone who tells you that is a bigger idiot than you will ever be.

100:1? Be Smart

If you have a $1,000 trading account and you want to build it up, you want 100:1 leverage. That means that you could put up $100 for a trade, and trade a $100,000 position, and you’ll be making (or losing) $10 a pip. Make a few 20-pip trades a week, and that’s some sweet profit. Of course, you can lose money, but listen, you’re going to be smart about the trades you open.

And after you open that trade, you have $900 in usable margin in your account, so your trade can move a little bit against you and it’s no big deal. You won’t margin call. You won’t have to be all stressed out about it.

And hey, listen, I didn’t just recommend that you trade a standard lot ($100k position) on a $1,000 account. I’m just saying that I like that the decision to do that is in your hands, not the government’s grubby little margin-restricting paws.

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