There are several reasons why forex and CFD traders fail on the market, the most frequent one is due to a poorly used leverage.It is vital to learn how to handle leverage properly in order to achieve steady profits. Most novice traders underestimate the impact that wrongly used leverage can have on their capital. It is more than easy to completely destroy your financial funds if you do not have enough experience with the leverage.
With great power comes great responsibility
Leverage can work for us as well as against us. The leverage is a strong tool which usage has to be learned. Thanks to it we can earn loads of cash even with a relatively small capital. However, we can not forget how risky the use of leverage can be. Learning how to trade forex or CFDs with leverage is not a simple task and it takes its time. Most of the time will be probably spent on a practise demo account on which you can not earn a single penny. The results, however, will be in the end definitely worth it.
Beginner traders – Be careful here
Do not get all excited about the big leverage that brokers advertise in the attempt to attract new clients. 1:20 is the biggest leverage that beginning traders should use. Or they should trade even without it. Traders who have got enough experience can take advantage of a bigger leverage. When you are choosing a forex or CFD broker do not worry about the fact that it might not offer sufficient leverage. Because that almost never happens and advanced traders know that trading with huge leverage is not the best thing to do even tho they have the capital for it.
What brokers welcome and want from traders
Most brokers offer big leverage with a small minimum deposit. They try to compete with one another who can make forex and CFD more attractive for a new group of people. The majority of traders who already have got experience in trading either already trade somewhere or they have rather decided to quit this tough business. And because brokers need a constant increase in a number of new clients they provide the opportunity to trade to almost anybody.
And with the tempting offer to enter the place where many millionaires were born, good amount of people will get attracted by a low min. deposit requirements and by a big leverage that should make those huge earnings possible. But most of those people have no background in finance niche and they have a very low or no experience with forex or CFD trading.
And with the tempting offer to enter the place where many millionaires were born, good amount of people will get attracted by a low min. deposit requirements and by a big leverage that should make those huge earnings possible. But Such traders use in most cases big leverage and with the minimum knowledge about the market they wipe out their initial deposit in a blink of an eye. And why wouldn’t brokers welcome such clients? They always appreciate the money they get from them. So please, I urge you to be realistic and keep your expectations in check. Because if you do not do so you might be on your way towards destruction (well, at least the capital you have deposited might be).of those people have no background in finance niche and they have a very low or no experience with forex or CFD trading.
How to learn using the leverage properly
The best way to learn how to handle the leverage is to practise with it, trade with it. With the use of leverage, every pip heading towards your direction can mean significant earnings. For a unexperiencced trader, it will in most cases mean disaster. Practising with real funds is absurd, that is what demo accounts are for. So I encourage you to create one practise account and discover yourself how good you are with the leverage. After few months or better when you are absolutely certain that you can handle the use of leverage to your advantage, you can think about trading on a real account with real funds. The temptation to jump on a real account sooner than you are ready might cost you the hard made money you earned in your job, so think about your decision twice.