Before start using Forex Automoney platform, the investor has to take under consideration a very serious matter: what is the right leverage to use?

Leverage is one of the factors that influence our Forex trading, over the years I have seen a lot of traders making terrible mistakes when choosing their leverage. Often those mistakes cause an investor to think that the trading technique he uses is wrong, and he would change his trading technique based on bad information.

Before one can conclude anything about a certain trading technique, Forex Automoney included, he should eliminate all “noise” factors that might lead him to a bad conclusion. This article tackles only one aspect of leverage consideration: THE RATIO.

There are many brokers out there, who will let investors trade with a crazy leverage of 1:1,000, which means that investor will need to deposit $100 in his account, in order to open positions up to $100,000. This leverage is considered as extremely dangerous, and it almost always would end up by losing money. With this kind of leverage, the Forex market needs to go just 10 pips to the opposite direction, and the broker will close his deal with $100 loss.

Even other leverage, not as extreme as in the example I have given here, might be wrong. Every experienced investor will tell you that you don’t end up earning money on each position you take. Each investor has his own private statistics regarding his successful positions; this rate has to be taken under consideration when the investor chooses his leverage.

Let’s assume that a certain investor have a win loss ratio of 3:7, which means that on every 10 potions he’ll take, he is going to lose money on 7 and earn money on 3. It is possible to have this kind of ratio and still earn money by the end of the month, because of the stop- loss and take-profit limits that have a significantly opposite ratio. In this case the investor might have a 7 loss strike before he’ll have one profit. It is quite obvious that in this scenario, if the investor will chose an unsuitable leverage, he would end up losing all his money.

For that example we can learn that the leverage has to fit an individual investor, based on his success statistics. There are no true advices telling all investors what is the right leverage to use.

Personally, I consider higher leverage then 1:10 to be dangerous to investors; the investor has to feel comfortable about his losses in order to produce winning position. It doesn’t help if the investor had a few bad strikes, and he looks at his account and sees how the leverage actually have almost drained the money out of the account.

All Forex investors should remember: we are playing in statistical backyard, so we have to play by the rules; we have to adjust all factors to our own success statistics. If we won’t eliminate all “noises” (like in this example), we may end up thinking that our Forex Automoney Platform doesn’t work well, when actually we should take the blame of tampering the process.

From Michael Kahiri – MBA in Finance and Trading strategies

Author Bio: Michael Kahiri is an MBA in Finance and Trading Strategy graduate, a day trader, with a lot of experience in: comparing, analyzing and evaluating financial products. Please read more information regarding Forex Automoney at: http://www.forexautomoney-review.com.

Category: Finances
Keywords: forex automoney, forexautomoney, forex automoney review