By Ashley Jessen
A number of profit awaits the day trader who knows how to take advantage of leverage for any instrument, be it Contracts for Difference, Forex, or Futures. Whilst the profits can add up to over 440% like Dave Limburg during a recent live trading competition the downside can be devastating. Today we’ll take a look at some CFD leveraging basics to keep you on the right side of the ledger.
The Fundamentals of Leverage
The absolute basic of leveraging your CFD, Futures or Forex account come down to this. By using a high level of leverage, you will have excessive wins and also excessive losses. This rule is inevitable. So your goal should be to use leverage to your advantage and maximize your gains whilst minimizing your losses. This may be too good to be true but we’ll check on what we can do to attain this. Small steps to leverage success
When you find yourself bitten by a trading bug and you end up with your big win you’ll discover that it may then be followed by a huge loss. Call this Murphy’s or any name you prefer but chances are if you haven’t experienced this there’s a great chance that you will. Large profits can be tempting but you should focus on how to protect yourself from the downside and minimize the amount of leverage you are to use. With that, start really small and avoid exceeding more than twice your leverage or your account size. This only means that on a $10,000 trading float you wouldn’t like to take total positions that go beyond $20,000. You may get more by using this small amount of leverage.
Your trading leverage should be at a respectable level
Here are basic advice you have to take note of when using CFD, Futures or Forex leverage. If you have little to no trading experience, do not exceed more than 3 times your account size. So for your $30,000 account you should not take total positions that go beyond $30,000. Once you gain more experience you can consider using more leverage but at the outset, don’t exceed this amount. You can consider much more leverage when you have become more experience but take note that leverage works like a two-edged sword. It can work wonders when it works in your favor but not when it is going against you. Stay small for as long as you can and enjoy a long term and healthy relationship with leverage.
About the Author
Learn about the 9 Rules to make You Safe when Investing Money to earn Money. By understanding these significant CFD Trading Rules you can be sure to be on the right side of the ledger more often. Learn more about the CFD revolution by checking to http://www.learncfds.com/
