Forex Stop Loss Calculator – Leverage is Not the Reason People Lose Money in Forex

Forex Stop Loss Calculator

Forex traders often blame leverage so often that they over look the real causes of their losing trades. For those who are new to Forex, Leverage is the amount of currency a currency trader can command to trade relative to the amount of equity he or she has in the forex brokerage account. Usually traders uses 100:1 leverage, which means they command $100 for every $1 in their account. Forex Stop Loss Calculator

This also means that traders will profit 100 times more as if they own 100 times of their equity. A service that Forex Brokerages to help the public whom may not have a lot of cash, but able to earn more than usual.

Too good to be true? Not really because if the market go against your position, you will lose your equity 100 times more than usual too.

So basically what Leverage does is merely amplify your profits and loss.

Many currency traders will be extra cautions, especially when it comes to losing money, are suggesting that why not scale down the leverage or discard this service at all?

By doing that, this will make Forex trading totally impractical and inaccessible to the public whom have only little equity in hand.

By reducing the Leverage, some strategies that as tight stop loss will be narrower, which resulting the trader to have more equity in his account to make a few certain strategies to function fully. By obliterating Leverage, the amount of cash in the forex account will be extremely large, just to make sure his stop loss for his strategies to be practical.

However, even without Leverage, poor FX traders will still lose money. Why is that so? One of the major reason is because inexperience currency traders does not practice good money management.

High Leverage only bring down the cash need to trade in a Forex position. Although it is wise not to use an extremely high leverage in forex, moderation usage of leverage will be just nice. However do pay attention on money management. Forex Stop Loss Calculator

Money Management means trader should plan their trades, with their entry, stop loss and take profit levels. After which, determine the lot size. The lot size should be fix based on the amount of capital being risked. And every trade the capital being risked should be the same in form of percentage.

It is because every trade, the same amount of capital (in terms of percentage again) is on stake, this already differentiate from a wise trader from a gambler. Why is that so?

Let’s say a Forex strategy is tested and proven has a winning rate of 60%. Which means for every 100 trades, you will win 60 trades. You will also lose 40 trades.

If you constantly invest the same amount of capital in every trade, you will should be winning 20 trades. Those 20 winning trades are your profits.

If you are inconsistent with your investment. Which means every trade, you stake in a different percentage. Your result will be very inconsistent too. The only consistence in your trades is winning rate, 60%. If other factors are consistent too, your results will be predictable too. So by removing the consistency factor of your stake, and without knowledge when will the winning is coming, it is logically to know that your result will be different from what you learn.

Leverage is not the causes of many new traders lose of equity. Poor money management is. Leverage is just a instrument. Use the instrument at the right place, the right way, results will be shown and profits will be gain. If otherwise, it will come and bite you, taking your hard-earned money and profiting others. Forex Stop Loss Calculator

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