Just opened an account and they’re pushing this 1:500 leverage hard. I get that it amplifies gains but the risk side has me confused.
How much can you actually lose with high leverage? Is there a safer ratio to start with?
Higher leverage just means faster account death when wrong.
High leverage is borrowing money to trade bigger positions. With 1:500, your $1 controls $500 worth of currency.
Sounds awesome until you see how losses work. A tiny 0.2% move against you kills your entire account with max leverage.
I blew two accounts learning this lesson. Now I never go above 1:50, usually stick around 1:20.
Your broker loves pushing high leverage because they profit from spreads - bigger positions mean bigger spreads for them. They don’t care when you blow up.
Start with 1:10 or 1:20 max. Learn position sizing first. The leverage isn’t going anywhere once you actually know how to use it.
Leverage lets you borrow money to trade with more cash than you actually have. If your trades go south, you can lose big and fast.
Leverage cuts both ways. Sure, your broker might offer 1:500, but you decide how much to actually use. With $1000, you could open a $500,000 position - but one tiny move and you’re toast. Or you could open a $10,000 position using just 1:10 leverage from the same account. It’s all about position sizing, not whatever max leverage they’re dangling in front of you. Figure out your risk per trade first, then work backwards to your position size. Most traders who actually make money use way less leverage than what’s available.
Been trading with different leverage for years. Here’s what I learned the hard way.
Your broker isn’t helping you with 1:500 leverage. They profit when you trade, not when you win. Higher leverage = bigger positions = more spread money for them.
Started with 1:100 thinking I was conservative. Nope. Killed my first account in three weeks because I didn’t get how leverage affects your loss per pip.
Now I stick to 1:30 max, usually 1:20. Still good profit potential but gives me room when trades go wrong.
Here’s what nobody tells you: high leverage can wipe out more than your deposit if your broker doesn’t have negative balance protection. Check this first.
Ignore whatever leverage they offer. Risk only 1% per trade. Calculate your position size from that. That’s what keeps you alive long enough to actually learn.
Leverage magnifies your gains and losses. With 1:500, quick market shifts can deplete your account in no time.
Instead of fixating on leverage ratios, concentrate on your actual risk per trade. Even with 1:500 leverage, you can minimize risk to 1-2% by adjusting position sizes.
New traders often overextend themselves with leverage and neglect risk management. This is how losses happen.