Often we find a broker who offers very high leverage to 1: 1000 or even 1: 3000 or more. But there are also brokers who offer low leverage like 1: 200 to 1:50 or below.
and low leverage is usually provided by regulated brokers, as regulators also do not want to harm Traders, so that the regulatory agencies are right then he will also guarantee if anything happens with the broker company.
Which is better and safer, High or Low leverage?
We will first discuss the basis of what leverage
LEVERAGE IS A POWER STREAM WHERE WERE ONLY WITH SMALLER CAPITAL THEN WE CAN TRANSACTION WITH A GREAT NOMINAL
With leverage, then the formula% use of capital margin = leverage x 100
Example: Leverage 1: 200, then it only takes (1/200) x 100 = 0.5%
so to transact in 1 lot volume (worth 1 x $ 100,000) then only need its 0.5% margin capital from $ 100ribu, that is = $ 500.
For only $ 500 you can trade for the same $ 100,000 as you would in a conventional money changer.
That is the main attraction of Forex Trading because of Leverage factor as its leverage, so with small capital but can produce bigger value.
From the above factors, it seems with the higher leverage then surely more profitable dong ??
The answer is NO!
You have not calculated the risk factor
YES, THIS RISK FACTOR IS THE IMPORTANT FACTOR IN THE WORLD TRADING, BECAUSE WE ARE NOT CAUSING THIS RISK FACTORS THEN THE RESULTS WILL BE AWAY OR 0 (ZERO).
Basically human nature is greedy, and many who do this forex trading is actually being pursued by a goal that is WANT TO RICH RICH or MAKE MUCH MONEY. (what is your reason also when choosing forex trading?)
And if we know that if forex can make every person who jumped into it get rich quickly, then surely there will be no poor people in this world 🙂 This is of course the thought of a layman who has not studied in depth about this trading world, and usually they are only consumed by the brokerage Actors, Ads or by Seminars / Training-forex training that promises something seductive, but it is just a marketing trick just to capture consumers.
BECAUSE THE FACTOR EACH PERSON WHO WANT QUICK RICH, GREEDY, WANT FAST-FAST repay their debts, WANT TO BUY CARS, HOUSES LUXURY AND SO … THAT IS FINALLY ARRESTED BY THE BROKER-BROKER IS NOT RESPONSIBLE TO PROVIDE SOMETHING THAT LOOKS SUPERB AND AS IF BECOME ANSWERS FOR IT ALL, YES WITH MARKETING TRICKS: “WITH YOUR SMALL CAPITAL CAN TAKE IT ALL HERE”
from there, the idea arose from the band brokers to provide super high leverage, even if it could be leverage infinity all hehe …
There are many proverbs out there who say Leverage in Forex can be a double-edged sword and can hurt itself if we do not understand the risks. It’s true.
The victims of these high leverage brokers also come mostly from the middle to lower, because that is among the biggest cake and also the most easily tricked with dreams and the lure of RICH WITH FAST THROUGH FOREX. So do not be surprised if the high leverage brokers generally also provide the methods of money transfer “which is important easy to deposit first”, no matter the way legal or illegal, because the money is actually not going to be able to come back anymore … (because later will dihabisin by the market maker broker / bucket shop it with a way)
With the leverage provided so high there, anyway market maker brokers is actually no loss nothing and no burden, because eventually the ends of money the customer will return again to the bag of the marke. Only a handful of people who might be given Victory by the Broker to become their viral mouthpiece that the trade in the market maker brokers turns out to be profitable too (whereas all the others were all massacred by the dealer broke up)
Here’s how it works how:
please open your eyes carefully so you can know clearly behind the game of super high leverage it
In the leverage factor, there is a guarantee of retained margin, and this is actually the rest of the funds that will be returned by the broker (brokerage company) if you suffer losses. The greater the volume of the lot you transaksikan the guaranteed margin on hold for the security of your funds will be even greater as well.
The illustration below takes an example when using a regular 1.0 lot volume transaction, which is where the per point movement of the users.
The illustration below takes an example when using a regular 1.0 lot volume transaction, which in which the per point movement of the use of the volume of 1 lot will be worth $ 10 per point. So if the profit 50 points it will produce 50 x $ 10 = $ 500, and vice versa if there is loss
at a low leverage of 1: 100, the margin assurance is 1% of the traded lot volume
so if your capital is $ 1500 and you are trading on a regular 1 lot volume (or 1.0 lot) then the margin guarantee is held by your broker 1 x 100000 x 1% = $ 1000.
If you want to open the position again (even though the previous open order has not been closed) then the broker system will limit you to not open position again, because the volume of lot used is almost over the limit of the safe limit of the $ 1500 capital, and it can be dangerous if forwarded.
Well, from the retained margin, your equity resistance is at $ 500 (from $ 1500 minus the guaranteed margin value of $ 1000)
Margin level from low leverage broker will work. They typically apply a 100% stopout margin level system (margin level formula = margin assurance divided by equity x 100%). So when the Floating Equity drop = Margin Guarantee, the broker system will automatically close all open positions to keep your prisoner and your trading funds safe from the risk of ludes or slumped deeper.
So if you suffer losses (or loss) and the remaining resistance of $ 500 you are exhausted then the broker system will stop it Automatically in order to avoid losses deepened. (in the sense that this is your double layer of retention so as not to get worse or wasted)
If there is a loss as above or when the closing order, then the guaranteed margin hold is $ 1000 will be returned to you. So you still have the remaining $ 1000 that you can use again or withdrawn.
(even if you are wrong input lot volume becomes very big or full lot, then itupun still will be SAFE, because margin of collateral which arrested of course bigger, so refund to you later also will be bigger and not sold if total loss happened though)
From the example above illustration you can see that even if you are trading with full lot though then your prisoner is actually been automatically steered by the broker system so as not to run out and sold out. This is what it means that low leverage is Safer, because it was awake automatically by the broker system. (the greater the volume of the lot, the guarantee the margin will be even bigger and safer, so the protection is stronger as well as Insured)
The profit generated is also absolutely nothing is reduced, because the value of profit or loss has nothing to do with this Leverage.
COMPARE WITH GAME OF LEVERAGE SUPER HIGH FOLLOW:
High leverage up to 1: 2000, retained margin guarantee 0.05%
Trade 1 lot, then the retained margin value = about $ 50
The value of retained margin is actually no function loh! because these super-high leverage brokers also use the margin level system for StopOutnya up to 0% (from normal is 100%)
The bigger your open order volume, so be wary of the daily interest rate swaps that continue to erode your funds
When there is a total loss, then almost no margin guarantee funds are left that can be returned to you. Because generally the stopout level (margin level margin for margin call) from this type of broker is close to 0%
In types like this, supposing your valuables are not there insurance, so that if there is a disaster it will be exhausted not left.
The margin rate held at 1: 2000 leverage looks very small compared to 1: 100 leverage, and this will PSYCHOLOGICALLY make people more greedy and encouraged to open order again and again with more until it does not finally over limit, whereas it very dangerous. (this factor is captured by the band broker to provide this super high leverage, because the human factor is basically greedy and want kaya2 rich, so provided that way to open order again Again and Again with large volume lot)
Therefore, why then many stories from the layman who complained out of money because of forex trading and became cured, this is actually because of their lack of understanding that time was imprisoned in the practice of a misleading city broker like this.
It seems trivial, but this psychological factor can not be made funny, because if your trading is not based on good risk and psychological management then you will not be a successful trader (although your technique is good), but will only become a gambler that failed.
Well here lies the difference in high leverage, pay close attention
in the super high leverage (especially with a 0% stopout margin level system), well if your capital $ 1500 is suffering losses, then the warranty returned to you almost nothing, or even none at all, so it really will be Ludes out . Especially if you are unconsciously already hooked to do open order with large volume lot (because it is believed the funds are still enough to do open order again and again …) when it was accidentally opened by the broker that the bigger the trap and you can quickly loss and run out, because the volume of the lot of oversize then surely its resistance to floating will also be weak and vulnerable.
What if I do open order transaction and then profit ?? the answer is do not hope to be easy profit in this high leverage broker 🙂 because if by chance you reach a very large profit due to open order with large volume lot it, then get ready you dijegal by market maker brokers system that loss with dirty game broker .
Because a broker or broker bucket shop like that get income from your loss, if you profit then the broker will reduce the profits of its cash bag to pay you, but if you loss then your money loss will be a fresh fund as a profit the dealer brokers. So from that do not hope you can profit easily in this kind of broker.
THEY ARE BROKER AIRPORT AND BUCKET SHOP BROKERS SUCH AS SUPPLIERS PROVIDE HIGH SUPER LEVERAGE IT IS SUPPLY WHEN LOSS DOES NOT REMAIN, AND SHOULD TO OUT ALL LUDES.
And it’s no wonder these bucket-shop brokers often provide something that looks like WOW and Super Pulls, like those super high leverage up to thousands of times, then offers fix spreads, self-pegged price fixes, super little spreads, super big bonuses and such … it is actually a batman trap to attract the layman.
Does this Leverage also have an effect on the side of the brokerage company?
From the use of leverage is actually the brokers also provide assurance to the liquiditor about the transactions of its customers, so if the leverage is higher then the brokerage company will certainly issue more money to the liquiditor (usually to the bank), and that from the side brokers can also be a burden. But if the brokers are non-regulated because they own so willing disetting any leverage then they do not need to put extra burden to the liquiditor as a guarantee, besides there is no element of the regulator who watched him properly or not in treating customers, and this certainly dangerous.
Ideally leverage should not be more than 1: 400 (best is 1:50 and 1: 100), especially in regulated brokers are generally bigger your capital then they also do not allow you to use leverage that is too high, because the safety factor and also factors from the regulators who can reprimand them.
Hopefully from this explanation, you can understand about the use of this leverage, the higher the leverage then the risk that you will face will also be greater. Use this leverage wisely and do not get stuck into the practice of improper brokers.