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Is 400:1 leverage better than 100:1?

  • #21
  • Quote
  • Dec 3, 2006 4:20pm Dec 3, 2006 4:20pm
Thank you Yoda, but if you don't mind explaining this to me in more detail, I do not see how leverage has an influence on my stops.
Sorry if I don't get it right away....
but I appreciate your help.
Thank you.
The problem with high leverage, and low margin is this: The forex just doesn't move (downtrend/uptrend) in a straight line. This means that even if you have bought a currency pair in the right direction, it will probably head in the opposite way, just for a little bit, before it goes in its over all direction. Your stop loss has to be greater than these temporary spikes, or else you will be "stopped" out of your position before the trend heads in your final position (either that, or there will be a margin call.) If you have a $1000 dollar margin, with 400:1 leverage, this means you can only withstand a 25 pip stop ($250 backs one standard lot with 400:1 leverage.) 25 pip spikes (spikes that temporarly go in the opposite direction) are extremely common in the Forex. Now, if you had an account with a 100:1 leverage, then you could put an order with a 100 pip stop loss. This 100 pip stop loss would cover you nicely against temporary negative spikes.
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  • #22
  • Quote
  • Dec 4, 2006 2:09am Dec 4, 2006 2:09am
I'm afraid I have to disagree - it's not what you are likely to lose on one trade, it's how much are you likely to lose during the worst drawdown you're system is likely to suffer following a bad sequence of trades. Backtesting over several years of historical data will give you an idea of the largest expected drawdown, which then allows you to calculate what leverage you can afford before going broke when that drawdown occurs.

Trading even 100:1 means that if your worst sequence of trades gives rise to a 1% drawdown - i.e a drop of say 132 pips on your accumulated profit on eurusd will lose you all your capital. 400:1 equates to a 31 pip fall and you're gone !

Or am I missing something here ?
i was just showing how to calculate your leverage per trade, e.g. if i am betting X lots with a Y bankroll how much leverage do i need? I was not trying giving any information how large your risk should be, thats up to your system.
  • #23
  • Quote
  • Dec 4, 2006 4:30am Dec 4, 2006 4:30am
Higher leverage allows you to open more positions. Sometimes this is useful. Like in an EA.

As with everything it depends on what you are trying to do.

Sometimes lower leverage is good because the margin call occurs quicker, so you save a larger portion of your account from ruin.

....so with that in mind, I've calculated my own risk projection, you will
have equal amount of losing trades, and at the end you end up with a low low balance, with 400:1, and with 100:1, you'ill have a higher balance...
in other words, margin calls come earlier with 100:1. Is this is what you
have been trying to explain to me?
  • #24
  • Quote
  • Dec 4, 2006 11:39am Dec 4, 2006 11:39am
Diallist or anyone else who can help,

Forex Beginners Money Managment post #13 where Diallist said :

"For my trades, the max leverage I will ever use is 10:1 true leverage, so I could have opened an account with only 50:1 broker leverage, but I didn't. Instead I opened my account with 400:1 leverage. Why would I do that if I'm never going to use that much leverage? I did it for the simple reason that 400:1 leverage gives me the smallest margin requirements. I have one system that works best with small margin requirements, so this works out well for me. "

I too am looking for a reliable broker who won't trade against me and also allows 400:1 leverage so that I can get the best margin requirements. I use a "true leverage" of 6:1 but want to keep the margin requirements as low as possible for my system. Can you steer me in the right direction for the broker you have used who fulfills those requirments?

also I really just don't understand how you can use say 5:1 "true leverage" on two different platforms (a 100:1 leverage platform and on a fifferent 400:1 leverage platform) and have two very different margin requirements based on the leverage size NOT the true leverage that I actually use.

any help is really appreciated, thanks alot in advance

traderdp
  • #25
  • Quote
  • Dec 4, 2006 12:17pm Dec 4, 2006 12:17pm
yes margin calls come earlier with lower leverage because you are required to hold that (much more) money as margin. If you have 400:1 leverage, then the margin requirement is very small. Therefore if you get a margin call @ 400:1, there's not much left in the account.

I'm not saying lower or higher leverage is better. It all depends on your strategy. I'm just pointing out the differences.

....so with that in mind, I've calculated my own risk projection, you will
have equal amount of losing trades, and at the end you end up with a low low balance, with 400:1, and with 100:1, you'ill have a higher balance...
in other words, margin calls come earlier with 100:1. Is this is what you
have been trying to explain to me?
  • #26
  • Quote
  • Dec 4, 2006 12:50pm Dec 4, 2006 12:50pm
Oanda is my broker and I only have 50:1
I wish it was atleast 100:1 but the tight spreads are more important to me.
How you act is more important than how you feel.
  • #27
  • Quote
  • Last Post: Feb 8, 2026 8:41pm Feb 8, 2026 8:41pm
From our past talks about capital preservation and distribution?br /> Broker leverage doesn抰 blow accounts.
Trade leverage does.
You could have 100:1 available ?br /> but if you only use 1.5:1 per trade, you're conservative.
Most blown accounts happen because traders:
Overuse available leverage
Size positions too large relative to equity
Ignore distribution of losing streaks
Leverage multiplies volatility.
It does not create edge.
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