The Truth About Leverage
Contrary to widespread belief, using leverage is NOT a good way to trade. If you type "forex" in Google, you will be inundated with market maker's advertisements with claims of:
- commission free trading,
- up to 200:1 leverage,
- low margin, and so on . . .
Leverage is a dangerous weapon. While it may enable you to explode your profits, in the same breath, it can destroy your trading career with little effort. The market makers lure you with the knowledge that you can make thousands from as little as a few hundred dollars. What they know, and you might not, is that if you consistently use high leverage, chances are it won't be long before your account is wiped out. And while the money in your account depletes, every trade that you make puts more money in the pockets of the online brokers.
If I showed you a way to make $3000 profit with one trade, from an investment capital of just $1000, would you go for it? Of course you would! Who doesn't like money? And this is the temptation for amateur forex traders. They get suckered into this idea of 100:1 leverage and think they can use that instead of a good trading system. Hence, 90% of all forex traders fail. It is easy to make money with forex, after all, the market can only really move one of two ways (besides sideways - consolidation). The difficulty is keeping that money and maintaining steady profits which are in a surplus of you losses.
I strongly detest excessive use of leverage which is so the market makers so strongly promote. If you would like to know the right methods to make money with forex, visit my blog
Read this and you'll have avoided your first catastrophic forex trading mistake.
John Marks is a full-time, successful day trader and intrernet entrepreneur.
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