### The soul of foreign exchange trading - leverage

read:2023/2/26 10:33:03

true forextradingaccountsregcashback forexter is a change in value when profit, our true leverage will gradually decline Example: the principal of $100,000, forex trading accounts traded 10 lots (1 million contract value) of the U.S. forextradingaccountstype Japan, then we are using 10 times the leverage, when we make a profit of $ 10,000, then our principal grows to $ 110,000, while the contract value is still 1 million When we make a profit of $10,000, our principal grows to $110,000 and the value of the contract remains at $1,000,000, then our true leverage is only 9 times when we make a loss, our true leverage rises gradually Example: $100,000 principal, we trade 10 lots ($1,000,000 contract value) of US-Japan, then we are using 10 times leverage, when we make a loss of $10,000, then our principal falls to $90,000 and the value of the contract remains at $1,000,000, then Our real leverage will be 11 times due to such a mathematical relationship, it will make us feel in the transaction to make money at a slower and slower rate, and lose money at a faster and faster rate, which is the root cause of greed and fear margin and leverage due to the different margins of each platform, and now also many platforms can adjust their own leverage, so look at the margin balance to do position management is very easy to make a mistake a Thing example one: in 200 times the leverage platform, 100,000 U.S. dollars to operate 20 hands of the U.S. and Japan, then the required margin only with 10,000 U.S. dollars, the account available margin for 90,000 U.S. dollars, this time trading this is easy to feel the position is very light, but in fact has used 20 times the leverage, when the market fluctuations reach 3%, the capital gains and losses float will reach 60% (Forex Bang www.waihuibang.com) Example 2: In 50 times the leverage of the platform, 100,000 U.S. dollars to operate 20 lots of U.S. dollars, then the required margin of $ 40,000, the account available margin of $ 60,000, this time the trader will realize that the use of close to half cabin of the margin, in fact, only 20 times the use of leverage, when the market When the market volatility reaches 3%, the profit and loss of funds will reach 60% of the floating so in different leverage platform, the same amount of positions, the traders feelings are different, the distance of the strong flat is also different, in example one the account can withstand 450 points (to the value of the U.S. and Japan point 10 U.S. dollars, the strong line 100% margin calculation), while in example two the account can withstand 300 points; when account one is strong When account one is forced to level, the account balance is $10,000, and account two is forced to level, the account balance is $40,000, but account one and account two are 150 pips away from the market distance of the strong level, so in the case of not having a full strategy, the account with high leverage is much riskier than the account with low leverage, and when the account encounters a strong level, the account with low leverage will have more money left over to fight the real leverage again The real leverage and holding costs determine how far we can fight. When our real leverage reaches 20 times, we start to incur a significant risk, in terms of limits (not considering margin requirements), with 20 times leverage and 5% volatility, the account funds will double or go to zero. If our true leverage reaches 50 times, then a 2% swing will double or zero our account, and 100 times true leverage with only a 1% swing, the same situation will occur. The key is to calculate in advance the real leverage to be used when we slingshot to the furthest point in the counter-trend layout; conversely, when we add positions to the trend, our holding costs will gradually increase and get longer and longer from the original defensive line, and we should also calculate the change in our holding costs and the risk factor between the defensive line and the real leverage to be used after the position is added. Once we are able to clearly calculate the true leverage and our cost of ownership, we need to understand the position of our cost of ownership within the volatility, as volatility inherently limits the maximum true leverage we should use. If we use 20 times the true leverage and trade an instrument with a daily volatility of 2%, our maximum intraday return and risk is only 40%. The market is deceptive, when trading across cycles, originally we do price in the high range of the day, but after the next day, our price may be in the low range of the daily cycle; so when We must do one step to think of three steps when making a price, the better case is to do the whole set-up and then start making a price how to calculate the real leverage forex margin trading, in the calculation of the real leverage, we do not have to think about the margin occupancy rate first, especially now the platform various types of leverage are available, we just need to calculate our real leverage, and we want to fight the interval can be pre-calculated Out of our earnings and risk may (Forex Bang www.waihuibang.com) foreign exchange margin trading is a contract-based trading model, when we have a principal of 100,000 U.S. dollars, with how much we do the amount of U.S. dollar contracts can calculate our true leverage, example: in Europe and the United States exchange rate of 1.1200 traded 10 lots of Europe and the United States we traded 1.2 For example: in Europe and the United States exchange rate of 1.1200 traded 10 lots of Europe and the United States we traded 1.2 million U.S. dollars, the real leverage is 12 times in Australia and the United States exchange rate of 0.7500 traded 10 lots of Australia and the United States we traded 750,000 U.S. dollars, the real leverage is 7.5 times in the pound U.S. exchange rate of 1.3200 traded 10 lots of pound U.S. we traded 1.32 million U.S. dollars, the real leverage is 13.2 times in the United States and Japan exchange rate of 107 traded 10 lots of the United States and Japan we traded 1 million U.S. dollars In the cross rate, the leverage is 10 times the true leverage and in the cross rate, the leverage is calculated directly using the most leveraged meter of the previous currencies In the Australia-US rate of 0.75, we traded 10 lots of Australia-New Zealand, the leverage is 7.5 times In the Euro rate of 1.12, we traded 10 lots of European pounds, the leverage is 12 times the money float, true leverage and fighting distance When we start trading, we will have our If we want to take 10% risk in exchange for 30% return, then we have to look at the current price first, the distance we can set the stop loss price is suitable for us to make the price, and then decide the leverage, for example, we intend to short the Australian New Zealand at 1.0740, stop loss target above 1.0810, 1.0740-1.0810 distance is 0.65 If we are only willing to bear a 10% loss, then we can only use 15 times the leverage, and 15 times the leverage to the principal of 100,000 U.S. dollars, that is 1.5 million U.S. dollar contracts, assuming that the exchange rate of Australia and the United States is 0.75, then our maximum position is 20 lots of Australia and New Zealand contracts, and if we consider multi-shot trading, the higher the higher the sale, then at the first position of 1.0740 If we consider multi-shot trading, the higher we sell, then at the first position of 1.0740, we will not be able to place a full 20 lots of contract, we have to consider the use of the position of the higher we sell, and the final holding cost; if we end up with an average price of 1.0760, only 0.46% away from 1.0810, then the maximum position we can hold is 21.7 lots, as our position adjustment may be constantly changing, how to make the best holding cost, will determine the maximum position we can use. will determine the maximum amount of positions we can use, provided that the limit defensive level can not be easily changed