The dilemma of using leverage
There are many people who are using forex leverage. When using this advantage, you will find that you are not only opening yourself to new opportunities but also to new risks. Many traders do not understand that this leverage is a double edged sword. If they are used correctly, you can make the huge amount of money even with your small account. If they are not used correctly, you cannot make your money in forex. People do not understand the risks and they only look at the bright sides. It is good that you are optimistic but in a market like a forex, you have to think of all the possibilities. This article will tell you the dilemma of using leverage in forex trading. Not only it can help you to make money but it can also help you to make your account run out of money. When you will be reading this article, you will understand what we are talking about this leverage and why we are calling it a dilemma.
Leverage is often considered as double edge sword. If you can use it properly you can make a huge amount of money even with a small trading account. On the contrary, if you fail to use it properly it won’t take much time to lose your investment. The professional traders in Australia often suggest the novice traders use the low leverage trading account. Majority of the novice traders blows their trading account due to their lack of trading knowledge and experience. They always take a huge risk and lose a significant portion of their investment. But if you trade this market with low leverage, you can’t trade this market with a big lot.
Trade with proper risk management
Following proper risk management is very crucial to your trading success. You might have the best trade setup you should never take more than 3% risk in that trade. You need to consider the probability factors while trading CFDs. No one can give you the guarantee that a certain trade will hit the potential stop loss or take profit level. So it’s always better to trade with low-risk exposure.
The advantage for small traders
The best thing about leverage is it gives the small traders the freedom they need. Many people often thought they are not getting the chance to make consistent money because they have a small account. If only they could trade with a big account, they would be rich like the professional traders. The leverage gives them the chance and they can trade like big traders. When you are using leverage, it does not matter how much money you have in your account. You can have only 100 dollars in your account and with the magic of leverage, you can trade for 1000 dollars. This is the best side of leverage.
The risk is the dilemma
Why is it called a dilemma then? Because the good sides are not the only thing about forex leverage. When you are using it, you are also taking big risks in your account. What will happen if you do not make the money? This is the thing traders forget to know. They trade the market with big leverage but not all of these traders are successful. Many people lost the trades and they lost their money. It has happened to many traders in forex. They trusted these leverages and thought they can make money. They placed their trades but the trend did not work for them and they lost the money.
What is the solution to this dilemma?
There is no solution top using the leverage to the dilemma. Whenever you are using leverage, know the risks that you are taking on your account. There will always be this dilemma and trading will always be trading with leverage. The only thing you can do is the trade with the trend that you will know you will be successful in forex.