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Using too much leverage. A common mistake by Forex traders

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One of the biggest advantages of Forex trading is the high leverage that is given to the traders by the brokers in Forex trading. In fact it is higher than the stock market investment and any other financial market. There are some brokers who offers as much as two hundred times leverage to its investors. 100 times leverage is very common in the Forex market. This kind of high leverage is considered to be an advantage simply because with high leverage you can invest more in the Forex market with comparatively little deposits in your account. That means you can earn more profit by investing less at the Forex market.

For example with a 100 times leverage you can trade in one million USD if you have a deposit of USD 10000 at your account. That means you are investing only USD 10000 that is just 1% of the total traded value, while you are earning your profit on one million that is your total volume of trade. This is pretty impressive from the trader’s point of view as it takes the return on investment percentage higher. This is possible because the trading at the Forex market is done primarily on margin. That means when you are selecting a trade you are agreeing to the bid price and the ask price that is offered by your broker. As the Forex market is relatively stable in comparison to the stock market, there is hardly a difference in the currency price more than 1% in a single trading day. That means you can not loose more than 1% of your trade on a day. So it is easier for the brokers and financial institutions to offer you a leverage that is so high.

This seems to an all well proposition for the traders but there is another side of trading with such high leverage. That is if the trend of the market does not follow your speculations and the market acts on the opposite, you are to loose hugely at the Forex trading as you are investing with such huge volume. This is the reason that investing with higher leverage at the Forex market is considered to be a common mistake done by the Forex traders. Especially who are new to Forex trading and can not control the temptations of earning big at the Forex market often commit this mistake of investing impulsively with high leverage and ruin their investment. This is one of the most common mistakes that have ruined the future of many investors at the Forex market. So you need to be cautious and plan your Forex trading strategies meticulously so that you do not loose big time at the Forex market.

The higher leverage is undoubtedly a great opportunity for the Forex traders to make high earnings at the Forex market. But you should always remember that only because you are able to make huge investment with little deposits, you should never invest impulsively at the Forex market. Always remember that the Forex market is a sensitive market and higher leverage can also incur huge losses. So the key for successful trading at the Forex market is to watch the trend and select the trades diligently for getting good returns. As a beginner you should never get into multiple trades at a time that is another common mistake done by a newbie at Forex market.

For selecting the right trades you need to read the technical analysis and consider other aspects that will help you predict the movement of the currency pair that you are trading. As a beginner you can also opt for the mini and micro accounts that are offered by the brokers. These accounts will let you invest in the Forex market with little funds and you will get a first hand experience of Forex trading without investing huge money and incurring loss that will be hard to make up as a beginner. You can also take the advantage of the advanced automated Forex trading systems that will not only help you with the streaming quotes and trading but also provide you technical analysis results in simple forms that are easy to understand. Remember that high leverage is an advantage and if you can strike the right balance while trading you can really benefit from this advantage.

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