Siby Varghese is an award-winning trader who is highly active in promoting ways other people can trade like him and you can easily find out more about him online.
In one of his successful interviews Siby Varghese has outlined four major things that you must understand before entering into trading world:
- Know your limits.
- You must understand risk management.
- Identify appropriate instruments to trade.
- Keep your trading strategy simple.
As an experienced and a pro trader, Siby Varghese explains about how to leverage trading to the best level.
The leverage principle should always be taken very seriously by the investor, as overleveraging can cause major risks while your potential for earnings can be reduced if your option remains underleveraged, advices Siby Varghese.
Defining Leverage
Leverage includes the use of borrowed capital to invest in currency, stocks, or collateral. The concept of leverage is very common in forex trading. By borrowing money from a broker, investors can swap larger currency positions. As a result, leverage multiplies the returns of favorable changes at the exchange rate of the currency.
However, leverage is a dual-edged sword that means that losses can also be compounded. It is important that Forex traders learn how to handle leverage and incorporate risk management strategies to mitigate forex losses.
To boost returns from the currency trading process the investors use leverage. One of the highest leverage available to investors is the foreign exchange market. Leverage is basically a loan issued by the broker to an investor. The Forex Trader Account is set up to allow margin trading or lending. Some brokers can restrict their initial use of leverage from new traders. Traders may in most cases adjust the volume or size of the company to their desired leverage. However, the broker needs a percentage that is considered the initial margin of the notional value of the exchange in the account.
Leverage In Forex Trading
Depending on the size of the trade, the initial margin needed by any broker can vary. If an investor purchases a $100,000 value of EUR / USD, he would have to keep $1,000 as margin in the account. The criterion for the margin will therefore be 1% i.e 1:100 however in Siby Varghese automated AI forex solution the minimum leverage required is 1:200.
The Leverage level relies primarily on the trading strategy of the trader and the actual view of future market movements. That is, scalpers and break-out dealers aim to use high levels of leverage, as they are often sought for quick trades.
Risk Of Negative Leverage In Forex Trading
Negative Forex leverage impact on trading outcomes can be avoided. Firstly, do not trade in the entire balance, i.e. open a position with the full trading volume, does not make sense. Even though there is a significant potential to make a valuable profit through leverage, but it may also perform against investors.
For instance, if the currency behind your trades goes in the opposite direction to what you expected would occur, the leverage will magnify potential losses drastically.
In order to prevent disaster, forex brokers also typically have key tools for risk management such as stop-loss orders which can help traders manage their risks more effectively. A stop-loss is the business order with the broker at a certain price level to exit a position. A trader may thus restrict the losses on a company.
Siby Varghese highlights few fundamental points for the proper control of leverage risks:
- Using stops to trail
- Maintaining limited roles
- Limiting each place, the sum of money.
Forex leverage can also be used with careful management effectively and profitably. Notice that the leverage is versatile and adaptable to the needs and choices of each trader.
There’s always an issue of being over-leveraged, so be careful of that. If things go wrong, you can exhaust your account easily.
(Syndicated press content)
Read more:
