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  • Calculating Position Sizes

    To make things easier for you to understand, as usual, we’ll be explaining everything with an example. This is Newbie Ned. A long time ago, back when he was even more of a newbie than he is now, he blew out his account because he put on some enormous positions. It was as if he…

  • Position Sizing

    Now that we’ve learned the hard lesson of trading too big, let’s get into how to correctly use leverage using proper “position sizing.” Position sizing is setting the correct amount of units to buy or sell a currency pair. It is one of the most crucial skills in a forex trader’s skill set. Actually, we’ll go…

  • Never Underestimate Leverage

    Most beginners underestimate the potentially devastating damage leverage can wreak on their accounts. Understanding leverage enough to know when to use it and when NOT to use it is critical to your success! Leverage is a very powerful tool but both old and new traders use it to destroy their trading capital simply because they…

  • How Leverage Affects Transaction Costs

    Besides amplifying your losses, leverage also has another way of killing you. It’s a much slower kind of death though, kinda like dying by a thousand cuts. Most forex traders don’t see it coming and by the time they notice it, they’re DEAD. This killer we’re talking about is the associated transaction costs of using high…

  • Low Leverage Allows New Forex Traders To Survive

    As a trader, it is crucial that you understand both the benefits AND the pitfalls of trading with leverage. Using a ratio of 100:1 as an example means that it is possible to enter into a trade for up to $100 for every $1 in your account. With as little as $1,000 of margin available in your account, you can trade up to…

  • See How Leverage Can Quickly Wipe Out Your Account

    Hopefully, you now have a better understanding of what “margin” is. If you don’t know what margin is, or think it’s an alternative form of butter,  please read our previous lessons. Now we want to take a harder look at “leverage” and show you how it regularly wipes out unsuspecting or overzealous traders. Before we…

  • Be Careful Trading On Margin

    Margin can be thought of as a good faith deposit or collateral that’s needed to open a position and keep it open. Margin trading gives you the ability to enter into positions LARGER than your account balance. Although buying and selling on margin does not provide leverage in and of itself, it can be used as a form of…

  • Margin Call Explained

    Assume you are a successful retired British spy who now spends his time trading currencies. You open a mini account and deposit $10,000. When you first log in, you will see the $10,000 in the “Equity” column of your “Account Information” window. Usable Margin You will also see that the “Used Margin” is $0.00 and…

  • Leverage and Margin Explained

    Let’s discuss leverage and margin and the difference between the two. What is leverage? We know we’ve tackled this before, but this topic is so important, we felt the need to discuss it again. The textbook definition of “leverage” is having the ability to control a large amount of money using none or very little of your…

  • Ignoring Leverage: Why Most New Forex Traders Fail

    Most professional forex traders and money managers trade one standard lot for every $50,000 in their account. If they traded a mini account, this means they trade one mini lot for every $5,000 in their account. Let that sink into your head for a couple seconds. If pros trade like this, why do less experienced forex traders…

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