{"id":9882,"date":"2018-09-02T09:13:40","date_gmt":"2018-09-02T01:13:40","guid":{"rendered":"https:\/\/www.swingfish.trade\/blog\/?p=9882"},"modified":"2019-04-22T12:52:57","modified_gmt":"2019-04-22T04:52:57","slug":"leverage-traders-horsepower","status":"publish","type":"post","link":"https:\/\/www.swingfish.trade\/blog\/library\/casual-trader\/2018\/09\/leverage-traders-horsepower\/","title":{"rendered":"Leverage &#8211; Traders Horsepower"},"content":{"rendered":"<p>Leverage does not have to be confusing, simply think of it as dynamic Credit the broker does grant you, in fact, it&#8217;s just that, nothing more &#8211; nothing less.<\/p>\n<p><!--more--><\/p>\n<p>Let&#8217;s assume:<\/p>\n<ul>\n<li>you have a Credit Card (no not a Debit Card!)<\/li>\n<li>you are not jobless and have a regular income.<\/li>\n<li>the Credit-line on your Card is 3 times of what is on your paycheck every month.<\/li>\n<\/ul>\n<p>basically, that means that<strong> the Bank gives you a Leverage of 1:3<\/strong> on your Income.<\/p>\n<p>Using it wisely, buying 3 times the stuff what you can and sell it shortly after for a profit, paying back your Credit Card bill to 100% at the end of the month is a &#8220;Trade&#8221; made with all your available Leverage.<\/p>\n<p>so let&#8217;s assume you could not sell all of it, and you won&#8217;t be able to pay back all of your Credit to the bank, then the bank will charge you a pretty hefty Interest, in trading, this is called &#8220;Swap&#8221; (the broker charges you that every day during <a title=\"Rollover (what, why, how)\" href=\"https:\/\/www.swingfish.trade\/blog\/library\/casual-trader\/2017\/10\/rollover-what-why-how\/\">Rollover<\/a> if you hold on to positions)<\/p>\n<p>holding on to positions is just the same as extending the holding time on credit on your CreditCard.<\/p>\n<hr \/>\n<h3>Myth 1: you do NOT make more money with more Leverage!<\/h3>\n<p>see the 2 Screenshots of orders made on different accounts<\/p>\n<p>1:10 Leverage<br \/>\n<img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-9884\" style=\"font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen-Sans, Ubuntu, Cantarell, 'Helvetica Neue', sans-serif;\" src=\"https:\/\/www.swingfish.trade\/blog\/wp-content\/uploads\/2018\/09\/Screen-Shot-2018-09-01-at-9.22.32-PM.png\" alt=\"1 Lot Order on EURUSD with 1:10 Leverage\" width=\"414\" height=\"300\" srcset=\"https:\/\/swingfish.nullx8.com\/swingfish\/blog\/2018\/09\/Screen-Shot-2018-09-01-at-9.22.32-PM.png 677w, https:\/\/swingfish.nullx8.com\/swingfish\/blog\/2018\/09\/Screen-Shot-2018-09-01-at-9.22.32-PM-150x109.png 150w, https:\/\/swingfish.nullx8.com\/swingfish\/blog\/2018\/09\/Screen-Shot-2018-09-01-at-9.22.32-PM-320x232.png 320w\" sizes=\"auto, (max-width: 414px) 100vw, 414px\" \/><\/p>\n<p>1:500 Leverage<br \/>\n<img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-9885\" style=\"font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen-Sans, Ubuntu, Cantarell, 'Helvetica Neue', sans-serif;\" src=\"https:\/\/www.swingfish.trade\/blog\/wp-content\/uploads\/2018\/09\/Screen-Shot-2018-09-01-at-9.21.44-PM-320x221.png\" alt=\"1 Lot Order on EURUSD with 1:500 Leverage\" width=\"435\" height=\"300\" srcset=\"https:\/\/swingfish.nullx8.com\/swingfish\/blog\/2018\/09\/Screen-Shot-2018-09-01-at-9.21.44-PM-320x221.png 320w, https:\/\/swingfish.nullx8.com\/swingfish\/blog\/2018\/09\/Screen-Shot-2018-09-01-at-9.21.44-PM-150x103.png 150w, https:\/\/swingfish.nullx8.com\/swingfish\/blog\/2018\/09\/Screen-Shot-2018-09-01-at-9.21.44-PM.png 712w\" sizes=\"auto, (max-width: 435px) 100vw, 435px\" \/><\/p>\n<p>as you can clearly see, both orders will have the same monetary and percentage\u00c2\u00a0outcome regardless of Stop or Take Profit is Hit.<\/p>\n<h3>Myth 2: You do not lose more just because of leverage!<\/h3>\n<p>as you can see in the pictures above, both orders also have the same &#8220;cost&#8221; if you do lose the trade, so\u00c2\u00a0the losses will be the same.<\/p>\n<h6 style=\"text-align: right;\">[the statement above does not include you being Stupid by ignoring risk parameters according to your own trading plan and or market events that may occor]<\/h6>\n<hr \/>\n<h2 class=\"swingfish\">With\u00c2\u00a0Power comes Responsibility!<\/h2>\n<p>where Leveraged trading goes usually wrong is by taking it the wrong approach, peoples &#8220;assume&#8221; the leverage as a risk parameter instead of the Monetary risk, and this is where things go bad.<\/p>\n<blockquote><p>Just because you &#8220;can&#8221; buy 100.000 USD on a 100$ Account, does not mean you have to or should to!<\/p><\/blockquote>\n<p>it&#8217;s like driving a Sportscar.<\/p>\n<blockquote><p>Just because you have 500Hp on your disposal, and a top speed of 250mph, does not mean you were forced to drive with 180Km\/H through a school zone, it&#8217;s simply <strong>irresponsible, Stupid and against the law<\/strong> to do so!<\/p><\/blockquote>\n<p>it&#8217;s not Illegal to buy\/sell 200 or even 1000 times the funds you do have at your disposal,<br \/>\n<strong>but it is just as irresponsible and Stupid<\/strong> as driving like a maniac and risking other peoples lives.<\/p>\n<p>your risk is not to be killed physically, but you can be killed financially.<\/p>\n<p>a sudden market movement as an example can cost you far more than your Initial deposit.<\/p>\n<p>NO, <strong>a Stop-loss order can NOT safely protect you from such an event!<\/strong> (we will make a few example posts about this)<\/p>\n<p>even if there is no Fundamental or Technical reason for this to happen, keep in mind you basically shaving with a chainsaw by doing so, sure it can end up extremely\u00c2\u00a0smooth at a very short amount of time. but the chance that you will just cut your head off is a lot larger.<\/p>\n<h3>use it responsible!<\/h3>\n<p>Leverage can be a VERY Powerful tool, as (just like with a SportsCar you are able to make Sprints in an extremely short period of time).<\/p>\n<p>the very same does apply\u00c2\u00a0by trading with Leverage, if you in a situation where you meeting high probabilities, and the price movement against you to prove you are wrong is in a short distance, Leverage can be a VERY powerful tool, as it will allow you to buy\/sell assets on an extremely large scale, by maintaining the same relative risks. (yes relative!!)<\/p>\n<p>this is where Leverage becomes a powerful tool, instead of a curse.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Leverage does not have to be confusing, simply think of it as dynamic Credit the broker does grant you, in fact, it&#8217;s just that, nothing more &#8211; nothing less.<\/p>\n","protected":false},"author":1,"featured_media":9890,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[85],"tags":[],"class_list":["post-9882","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casual-trader"],"_links":{"self":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/9882","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/comments?post=9882"}],"version-history":[{"count":24,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/9882\/revisions"}],"predecessor-version":[{"id":26371,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/9882\/revisions\/26371"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/media\/9890"}],"wp:attachment":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/media?parent=9882"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/categories?post=9882"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/tags?post=9882"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}