Safeguards against high leverage

  • This topic has 5 replies, 2 voices, and was last updated 3 weeks ago by Time2Trade.
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  • #181100 Reply
    Time2Trade

      What safety measures and features do you use to stop excessive leverage from impacting your overall balance and portfolio?

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      • #181135 Reply
        Christian Harris
        Participant

          One of the most crucial steps in risk management is to avoid using high leverage.

          The reason is that managing risk becomes significantly more challenging, as even small market movements can lead to substantial profits or losses.

          This is especially true if you’re new to trading and are still developing a strategy.

          With stocks, for example, try trading fractional shares with no leverage until you’re comfortable with your strategy, trading platform, and risk management. You can day trade fractional shares with as little as $10, so there’s little ‘stress.’

          I recommend only considering trading forex with high leverage once you have lots (years) of experience.

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        • #181197 Reply
          James Barra
          Moderator
            DayTrading.com Team

            I would add to Christian’s point that many respected regulators (e.g. FCA and ASIC) limit leverage to 1:30 for retail investors. They do this because very high or excessive leverage has led to traders incurring thumping losses. So as suggested, steering clear of high leverage is sensible, especially if you are new to trading.

            Many brokers also offer flexible leverage where you can manually lower the amount used, and thus your risk exposure.

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          • #181298 Reply
            Time2Trade

              I appreciate you’re saying avoid it, but if I am sure I want to use leverage toward the higher end of the scale, are there any measures I can take?

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              • #181349 Reply
                Christian Harris
                Participant

                  ALWAYS use a stop loss – mental or hard stop.

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                • #181453 Reply
                  Time2Trade

                    Okay, cheers Christian

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