Being a successful forex trader requires patience and consistency. People who rush into the forex market for quick gain don’t last long.
As a forex trader, you have to think long-term; this is the best way for a consistent profit.
Beginners in the forex market often misunderstand the importance of leverage, your choice of leverage as a beginner will determine how profitable you’d be.
Until you have built confidence in a strategy, stay away from high leverage.
That being said, let me go on to talk about the best forex leverage for beginners.
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WHAT IS LEVERAGE IN FOREX
Leverage refers to borrowing a specific amount of money in order to make an investment.
Money is usually borrowed from brokers in Forex. In the sense that traders can build and manage large sums of money for initial margin requirements, forex trading provides significant leverage.
Forex trading leverage is in ratios such as 1:10, 1:20, 1:50, 1:500, and more.
Simply put Using leverage means that you can trade positions larger than the amount of money in your trading account.
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BEST LEVERAGE IN FOREX
The best leverage in forex is 1:50 and this is why:
It fits into many trading styles.
It works well for any account size or equity.
It works well for risk management and growth can be stable compared to higher leverages.
BEST FOREX LEVERAGE FOR BEGINNERS
The best forex leverage for beginners is 1:10 leverage and this is because as a beginner in the forex market demo trading cannot give you the confidence needed when you go live because this time your emotions are involved.
1:10 leverage is ideal because it gives you peace of mind when you place a trade and in case of a wrong trade, you will be able to effectively manage the losses; while all this is happening you are building real confidence.
WHAT IS THE BEST LEVERAGE FOR $100
The best leverage for a $100 dollar account is 1:100; this is the most used lot size for many professionals. This leverage ratio means that for every $1 you get $100 from your broker.
When trading with a $100 account, your lot size should not exceed 0.01 and your risk should be about 2% per trade.
However, as a beginner, 1:100 leverage is not recommended. If you are new to the forex market, give yourself time to learn by using smaller leverages.
1:100 LEVERAGE VS 1:500
Both leverages are excessively high for a forex novice. Many experts employ the 1:100 leverage. The greater the leverage, the greater the profit or loss.
Because of the high risk of using too much leverage, traders should be skilled and have enough experience in the foreign exchange market before using 1:500 leverage.
They should also think about the approach they’re going to use and their overall trading style.
At the end of the day, it is all up to the trader’s trading style and experience.
WHAT IS THE BEST LEVERAGE FOR $50
A $50 trading capital is small for a forex account, therefore proper market analysis and proper risk management, and leverage of 1:50 should be applied to grow your account.
When trading a $50 dollar account a trader should not exceed a lot size of 0.01 per trade.
WHAT IS THE BEST LEVERAGE FOR $20 AND $30
1:50 is good leverage for a $30 and $20 account. This trading capital is not right for a beginner. It is much better to be handled by experienced traders with a well-developed trading strategy.
With a $20 and $30 account, a trader cannot go beyond a lot size of 0.01 for proper risk management.
With a 1:20 leverage, a trader is can control 20 times his original trading capital, this gives more entry opportunities and holds trades for a long period of time(depending on trading strategy).
BEST LEVERAGE FOR SMALL ACCOUNT
There are hundreds of retail traders with little trading capital in the forex market, which is why knowing the appropriate leverage for small accounts is crucial.
The appropriate leverage for a small account is determined by the trader’s level of experience.
The optimal leverage for a newbie trader with a small account is 1:10-1:20, but an experienced trader can go as high as 1:100 leverage.
A 1:400 leverage ratio means that for every $1 in your trading account, you can make a deal for $400. Some brokers provide a 400:1 leverage.
The higher leverage a trader uses the higher your profit potential and loss.
Note that 1:400 leverage is super high and is not recommended, however, traders still go for this offer especially those outside the United States.
MAX LEVERAGE FOREX
Leverage in forex is up to the broker, there are brokers that offer as high as 1:3000 in leverage; which is not ideal for professional trading.
The forex market is risky and a trader can lose all his capital. This is why the most used leverage for traders is 1:100.
Other good leverage ratios in forex include 1:20, 1:30, and 1:50.
1: 1000 LEVERAGE GOOD FOR BEGINNER?
A beginner in the forex market has no business with 1:1000 leverage. A beginner in the forex market needs much lower leverage (1:20) to master his trading strategy.
Lower leverage with experience and patience will always see consistent profit than traders who choose very high leverages.