Using leverage for day trading

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  • #184834 Reply
    Harry_WD_WH

      Can someone explain how beginners should approach the use of leverage in day trading? I know it could give me greater returns but I want to understand all the risks involved.

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      • #184898 Reply
        Jessie_brackal

          The risks with leverage are that you could lose many multiples of your outlay. E.g. you put down €100 as margin giving you access to 20:1 leverage, or 20x. This means you COULD see returns of €2000, however you could also lose €2000.

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          • #184903 Reply
            WWHeiz

              Just a heads up, leverage can really crank up the impact of market volatility on your trades. When things get wild you can see huge swings which means bigger risks of taking a hit. Trust me, I’ve been there day trading with leverage – it can be a serious rollercoaster.

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            • #184901 Reply
              Petey_8402

                Let’s not forget if the markets don’t go your way and your account equity falls below a specific level you may get a margin call asking you to deposit more cash to keep your position open.

                Fail to do that and your day trading platform could liquidate your position at a loss.

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              • #185036 Reply
                Harry_WD_WH

                  Really useful, thanks guys. I’ve been reading up on the margin call process so I feel better about that now.

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              • #184897 Reply
                Steve

                  Beginners shouldn’t use leverage. The risks of losing large amounts of money are too high when you’re a newbie trader.

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                • #184904 Reply
                  Remmy

                    Effective risk management tools like setting stop-loss orders and limiting the amount of leverage used are crucial.

                    In my humble view, beginners should also use lower leverage ratios to limit potential losses. I can access leverage up to 30:1 in Europe but some global brokers offer leverage up to 500:1 and even more. I’d be steering well clear of those as a newbie trader.

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                    • #185034 Reply
                      Harry_WD_WH

                        Yeah I’m in Europe too so I’ll be sticking with the lower limits.

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                    • #184902 Reply
                      DONALDTrader

                        The best move is to kick things off with a day trading simulator/  demo account. You’ll get the hang of the ups and downs of trading with leverage without actually burning any cash.

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                        • #184911 Reply
                          Petey_8402

                            100%. Not even just to understand leverage – just to get a feel for the markets and hone setups before risking funds.

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                          • #185035 Reply
                            Harry_WD_WH

                              I’ve been using a demo account for a bit and will carry on doing so. I agree they have been useful for getting a taste of leverage trading.

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