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Thread: Is it harmful to use overleverage?

  1. #1
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    Is it harmful to use overleverage?

    Most forex traders over-leverage their accounts due to the desire for higher returns and misunderstanding of risk. They often underestimate potential losses and ignore proper risk management, leading to excessive trading size relative to their account size, which can amplify losses and increase risk significantly. I always keep my leverage lower even if LQDFX broker offers 1:1000 leverage.

  2. #2
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    When trading, we must always control risks and not jeopardize our deposit. Therefore, it is better to trade with low leverage. And let it be better that the profit margin be more conservative, but also more stable. And possible small losses on incorrect transactions can always be compensated later.
    opened an ECN account with FXOpen

  3. #3
    Senior Member FXOpentrading's Avatar
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    At FXOpen Ticktrader I know they offer leverage of up to 1:1000, but I still like to use leverage of 1:500, this may still be considered high leverage which is in line with the higher risk, but in trading, I always try to be disciplined by using the right position size. low to adjust risk tolerance.
    I trade at FXOpen

  4. #4
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    Yes, more experienced and disciplined traders can use higher leverage. After all, if you trade with stop losses and at the same time set the lot size in transactions according to the rules of money management, then in this way you can also control risks without exceeding the planned amount of possible losses.
    opened an ECN account with FXOpen

  5. #5
    Senior Member FXOpentrading's Avatar
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    Forex trading is a non-stop investment study, indeed risks are always present in every action, but with the right trading plan, trading risks can be minimized. Maybe the market is very chaotic, but if we can identify market trends this allows us to only enter best time when profitability is high.
    I trade at FXOpen

  6. #6
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    Quote Originally Posted by FXOpentrading View Post
    Maybe the market is very chaotic, but if we can identify market trends this allows us to only enter best time when profitability is high.
    The market seems chaotic when we cannot conduct a qualitative analysis of the situation and do not have technical and fundamental analysis. Accordingly, we do not know when to make trades, and when to wait, where to set the correct stop loss and take profit. And this needs to be learned. Without such knowledge, a small amount of leverage or risk control in transactions will not help in trading - the deposit will decrease, not quickly, but gradually.
    opened an ECN account with FXOpen

  7. #7
    Senior Member FXOpentrading's Avatar
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    Indeed, we need to practice more to find the right settings for determining stop loss and take profit. Conducting technical analysis also needs to be accompanied by fundamental analysis, reading high-impact news updates can be used as a consideration for trading decisions. Because sometimes technically, traders are in the right position, but after the news, the trend can change quickly.
    I trade at FXOpen

  8. #8
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    Quote Originally Posted by FXOpentrading View Post
    Indeed, we need to practice more to find the right settings for determining stop loss and take profit. Conducting technical analysis also needs to be accompanied by fundamental analysis, reading high-impact news updates can be used as a consideration for trading decisions. Because sometimes technically, traders are in the right position, but after the news, the trend can change quickly.
    Also, due to such important news, your stop loss may slip significantly and you may receive a larger loss than expected. Therefore, it is better to always monitor the release time of such news and make informed decisions regarding trading at this time.
    opened an ECN account with FXOpen

  9. #9
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    Yes, using overleverage can be harmful as it amplifies both potential gains and losses. It increases risk exposure beyond one's capital, leading to significant financial losses if trades move against expectations. Overleverage can also induce emotional stress, impair decision-making, and jeopardize long-term trading success.

  10. #10
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    First of all, a small leverage allows you to not lose much in case of unsuccessful transactions when the trader is not psychologically prepared for trading. Such traders always want to inflate the lot in transactions in order to earn more. Also, when a trader has a trading strategy of poor quality and gives a lot of wrong signals, such risk control does not allow him to lose a lot. Therefore, you need to try to improve your trading strategy by constantly analyzing your mistakes and not chasing bigger profits.
    opened an ECN account with FXOpen

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