Forex Leverage. What should I use?

One of the reasons why so many people are attracted to trading forex compared to other financial instruments is that with forex, you can usually get much higher leverage than you would with stocks. While many traders have heard of the word "leverage," few have a clue about what leverage is, how leverage works and how leverage can directly impact their bottom line.

SEE: How does leverage work in the forex market? 

What Is leverage?
Leverage involves borrowing a certain amount of the money needed to invest in something. In the case of forex, that money is usually borrowed from a broker. Forex trading does offer high leverage in the sense that for an initial margin requirement, a trader can build up - and control - a huge amount of money.

To calculate margin-based leverage, divide the total transaction value by the amount of margin you are required to put up.

Margin-Based Leverage =
Total Value of Transaction
Margin Required

For example, if you are required to deposit 1% of the total transaction value as margin and you intend to trade one standard lot of USD/CHF, which is equivalent to US$100,000, the margin required would be US$1,000. Thus, your margin-based leverage will be 100:1 (100,000/1,000). For a margin requirement of just 0.25%, the margin-based leverage will be 400:1, using the same formula.

Margin-Based Leverage Expressed as Ratio Margin Required of Total Transaction Value
400:1 0.25%
200:1 0.50%
100:1 1.00%
50:1 2.00%

However, margin-based leverage does not necessarily affect one's risks. Whether a trader is required to put up 1 or 2% of the transaction value as margin may not influence his or her profits or losses. This is because the investor can always attribute more than the required margin for any position. What you need to look at is the real leverage, not margin-based leverage.

To calculate the real leverage you are currently using, simply divide the total face value of your open positions by your trading capital.

Real Leverage =
Total Value of Transaction
Total Trading Capital

For example, if you have $10,000 in your account, and you open a $100,000 position (which is equivalent to one standard lot), you will be trading with a 10 times leverage on your account (100,000/10,000). If you trade two standard lots, which is worth $200,000 in face value with $10,000 in your account, then your leverage on the account is 20 times (200,000/10,000).

This also means that the margin-based leverage is equal to the maximum real leverage a trader can use. And since most traders do not use their entire accounts as margin for each of their trades, their real leverage tends to differ from their margin-based leverage.

Leverage in Forex Trading
In trading, we monitor the currency movements in pips, which is the smallest change in currency price, and that could be in the second or fourth decimal place of a price, depending on the currency pair. However, these movements are really just fractions of a cent. For example, when a currency pair like the GBP/USD moves 100 pips from 1.9500 to 1.9600, that is just a one cent move of the exchange rate.

This is why currency transactions must be carried out in big amounts, allowing these minute price movements to be translated into decent profits when magnified through the use of leverage. When you deal with a large amount like $100,000, small changes in the price of the currency can result in significant profits or losses.

When trading forex, you are given the freedom and flexibility to select your real leverage amount based on your trading style, personality and money management preferences.

Risk of Excessive Real Leverage
Real leverage has the potential to enlarge your profits or losses by the same magnitude. The greater the amount of leverage on capital you apply, the higher the risk that you will assume. Note that this risk is not necessarily related to margin-based leverage although it can influence if a trader is not careful.

Let's illustrate this point with an example (See Figure 1).

Both Trader A and Trader B have a trading capital of US$10,000, and they trade with a broker that requires a 1% margin deposit. After doing some analysis, both of them agree that USD/JPY is hitting a top and should fall in value. Therefore, both of them short the USD/JPY at 120.

Trader A chooses to apply 50 times real leverage on this trade by shorting US$500,000 worth of USD/JPY (50 x $10,000) based on his $10,000 trading capital. Because USD/JPY stands at 120, one pip of USD/JPY for one standard lot is worth approximately US$8.30, so one pip of USD/JPY for five standard lots is worth approximately US$41.50. If USD/JPY rises to 121, Trader A will lose 100 pips on this trade, which is equivalent to a loss of US$4,150. This single loss will represent a whopping 41.5% of his total trading capital.

Trader B is a more careful trader and decides to apply five times real leverage on this trade by shorting US$50,000 worth of USD/JPY (5 x $10,000) based on his $10,000 trading capital. That $50,000 worth of USD/JPY equals to just one-half of one standard lot. If USD/JPY rises to 121, Trader B will lose 100 pips on this trade, which is equivalent to a loss of $415. This single loss represents 4.15% of his total trading capital.

Refer to the chart below to see how the trading accounts of these two traders compare after the 100-pip loss.

Trader A Trader B
Trading Capital $10,000 $10,000
Real Leverage Used 50 times 5 times
Total Value of Transaction $500,000 $50,000
In the Case of a 100-Pip Loss -$4,150 -$415
% Loss of Trading Capital 41.5% 4.15%
% of Trading Capital Remaining 58.5% 95.8%
Figure 1: All figures in U.S. dollars

The Bottom Line
With a smaller amount of real leverage applied on each trade, you can afford to give your trade more breathing room by setting a wider but reasonable stop and avoiding risking too much of your money. A highly leveraged trade can quickly deplete your trading account if it goes against you, as you will rack up greater losses due to bigger lot sizes. Keep in mind that leverage is totally flexible and customizable to each trader's needs. Having an aim of trading profitably is not about making your millions by the end of this month or this year.

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Whale Watching: How to Spot Crypto Whales

A whale is a someone who has a lot of money to trade and can cause massive waves in the price of a cryptocurrency. Whales attempt to sway prices towards their preferred direction and usually succeed in the short-term.

Spotting a whale early could allow smaller traders to go along for the ride and profit alongside the whale as well as avoid being crushed by the whale and being left with losses.

How to Detect When A Whale Is BUYING

Looking to go long (buy) an altcoin? Why not wait for a whale to appear first?

CLUE #1: Look for abnormal increases in the bid size throughout the order book.

Let’s say this is a normal order book for a cryptocurrency. Normally, the average bid size is 1000 and the average ask size is 1000.

If there is a whale in the house, the order book might look like this:

Notice the difference in magnitude of the bid sizes.

CLUE #2: Look for an increase in volatility and price during a quiet period.

If a coin has been trading within a narrow range in a recent period, and all of a sudden….there is an unusual increase in volatility AND price spikes upwards, there could be a whale or whales in the house.

CLUE #3: Look for an acceleration of buying volume versus selling volume.

In a normal market, you’d usually see volume split evenly between the bid and the ask orders. This means 50% of the volume are buyers and 50% of the volume are sellers.

If price is an uptrend, buyers may be 60% of the volume, while sellers are 40%. And vice versa, if price is in a downtrend.

But if a whale is in the house, you’ll see an acceleration of volume on the buying side.

For example, if 90% of the volume is on bids within a short window of time, there’s probably a whale there.

How to Detect When A Whale Is SELLING

Assuming you’re not hodling, you don’t want to be long when there is a bearish whale, also known as a BearWhale, lurking.

CLUE #1: Look for sudden cancellations of big buy orders.

If you see large bid sizes starting to quickly disappear in the order book, there might a whale in the house who is about to take a massive dump (sell in large quantities).

Here’s what an order book might look like before the whale makes its move:

And here’s how it looks right before the whale is about to sell:

CLUE #2: Look for very strong momentum in price within a short amount of time.

When a coin has skyrocketed in price in a short amount of time, it’s considered to have very strong momentum. But it’s very likely that this momentum will quickly disappear just as fast as it appeared.

Why? Because the price was probably not driven by any new material information or real news, but due to a whale in the house driving up the price.

Once price has reached a certain level, the whale will stop eating (buying large quantities) and will want to take a massive dump (sell in large quantities).

CLUE #3: Look for very strong acceleration in volume.

If there is a sudden surge in volume and the amount of trading volume is abnormally high relative to recent volume (e.g. 3x larger than usual), there might be a whale in the house.

What is FOREX?

What Is Forex?
The foreign exchange market is the "place" where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business. If you are living in the U.S. and want to buy cheese from France, either you or the company that you buy the cheese from has to pay the French for the cheese in euros (EUR). This means that the U.S. importer would have to exchange the equivalent value of U.S. dollars (USD) into euros. The same goes for traveling. A French tourist in Egypt can't pay in euros to see the pyramids because it's not the locally accepted currency. As such, the tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate. 

The need to exchange currencies is the primary reason why the forex market is the largest, most liquid financial market in the world. It dwarfs other markets in size, even the stock market, with an average traded value of around U.S. $2,000 billion per day. (The total volume changes all the time, but as of August 2012, the Bank for International Settlements (BIS) reported that the forex market traded in excess of U.S. $4.9 trillion per day.) 

One unique aspect of this international market is that there is no central marketplace for foreign exchange. Rather, currency trading is conducted electronically over-the-counter (OTC), which means that all transactions occur via computer networks between traders around the world, rather than on one centralized exchange. The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney - across almost every time zone. This means that when the trading day in the U.S. ends, the forex market begins anew in Tokyo and Hong Kong. As such, the forex market can be extremely active any time of the day, with price quotes changing constantly. 

Spot Market and the Forwards and Futures Markets 
There are actually three ways that institutions, corporations and individuals trade forex: the spot market, the forwards market and the futures market. The forex trading in the spot market always has been the largest market because it is the "underlying" real asset that the forwards and futures markets are based on. In the past, the futures market was the most popular venue for traders because it was available to individual investors for a longer period of time. However, with the advent of electronic trading, the spot market has witnessed a huge surge in activity and now surpasses the futures market as the preferred trading market for individual investors and speculators. When people refer to the forex market, they usually are referring to the spot market. The forwards and futures markets tend to be more popular with companies that need to hedge their foreign exchange risks out to a specific date in the future. 

What is the spot market?
More specifically, the spot market is where currencies are bought and sold according to the current price. That price, determined by supply and demand, is a reflection of many things, including current interest rates, economic performance, sentiment towards ongoing political situations (both locally and internationally), as well as the perception of the future performance of one currency against another. When a deal is finalized, this is known as a "spot deal". It is a bilateral transaction by which one party delivers an agreed-upon currency amount to the counter party and receives a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present (rather than the future), these trades actually take two days for settlement. 

What are the forwards and futures markets?
Unlike the spot market, the forwards and futures markets do not trade actual currencies. Instead they deal in contracts that represent claims to a certain currency type, a specific price per unit and a future date for settlement. 

In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves. 

In the futures market, futures contracts are bought and sold based upon a standard size and settlement date on public commodities markets, such as the Chicago Mercantile Exchange. In the U.S., the National Futures Association regulates the futures market. Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized. The exchange acts as a counterpart to the trader, providing clearance and settlement. 

Both types of contracts are binding and are typically settled for cash for the exchange in question upon expiry, although contracts can also be bought and sold before they expire. The forwards and futures markets can offer protection against risk when trading currencies. Usually, big international corporations use these markets in order to hedge against future exchange rate fluctuations, but speculators take part in these markets as well. (For a more in-depth introduction to futures, see Futures Fundamentals.) 

Note that you'll see the terms: FX, forex, foreign-exchange market and currency market. These terms are synonymous and all refer to the forex market.

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PipPhenes Information!, [30.11.16 19:23]
[Forwarded from PipPhenes Inc.® Paid Signal Service]

Our stoploss' his less than yours do... Because your Spreads are HIGH AF! Or you dont look at the spreads when you enter... They change!


We have partnerships with XM, FXChoice, and FXCM... Why would we promote TW so much? They pay the least... We get 1/4 of commisions they get... They get the lowest commisions in the industry... We make maybe $50 a week on a good week with them...

They are the best for this group... Anyone with less than $10k should be using them...

We make probobly $50 a day with the other brokers... Not interested in the chump change... We suggest them to you because they will make or break your success with $200-$1000 accounts... TRUST US

****More on our TW partnership:

Here are the direct quotes from TradersWay:

On any deposit of $500 or more we will cover half of the deposit fee. They must email us here at with their account number and how much they deposited and we will credit it thereafter in approximately one business day. We won't respond to the email but will acknowledge it by making the adjustment.

Regarding the 150% - it will be effective possibly tomorrow after our IT handles it. We'll inform you. Clients will be able to select 150% from the bonus drop down list, so they need not send us any emails requesting a deposit bonus at all.

We will be getting all members the option of doing 150% bonuses contingent on no funny business from them. FYI if you are not with them and want to be please let us know or find our instructions in this chat.


OR email

We have talked over our concerns and we have been assured you will be A-Booked only.

Everyone of our members can get these benefits.

So sign up under our IB code or email them the IB code.

If you have TW already you will want to get in under us.
Just login

DO IT! We've had dozens of members Email us after confirming that TW has make the world of difference for them.

PipPhenes Information!, [30.11.16 19:23]
[Forwarded from PipPhenes Inc.® Paid Signal Service]
Note we do not recomend bonus' PERIOD... But thats your decision to make. WE just got asked what the catch is... Why would TW offer deals??? Because they want your business... They want the little bit of commisions they get from you... Obviously, they run a business... Just like the rest of them...

you do not have to switch... Just dont message us that stops have been hit if they have not for TW...
Dont message us when you get stop hunted because your B-Booked and your broker wants to rob you...

^^ Please take a moment to read these... EDUCATION! This is reall stuff... Your brokers force you to lose.

PipPhenes Information!, [30.11.16 19:23]

Hey welcome to our services!
We can be contacted right here anytime!

We also want to go over some guidelines for you to follow.

#1 We want you to feel comfortable asking us anything, anytime!

#2 We want to make sure you are using a good brokerage. If you get this wrong you will never profit. We highly recommend Tradersway because of their low spreads, honesty and well we've been profiting with them for almost 10 years.
Here's our link to them, this link puts you in our TW group offering you 150% bonuses and no deposit fees.
*We also like XM and FXchoice

#3 risk management one of the most important aspects of trading. We need you to follow these if you want any success in Forex Trading.
The rule is 1% of your account. So for example if you have $500 trading account the max lot size you should ever use is 0.05, we would recommend .03

$600 = .06 or less
$900 = .09 or less
$1100 = .10 or less
$1200 = .10 or less
$1500 = .13 or less
$2500 = .20 or less

We recommend going even smaller for your first few weeks.

#4 make sure you have an ECN.MT4 account. Making sure you have a MT4 account and use it to trade makes sure your broker isn't messing with your charts.

#5 don't EVER close trades in negative let them hit SL, you can also take the trades within 24hrs of posting them. We need you to try and take all of the trades.

#6 Learn while you earn. Ask us questions, get our book or course. Google around and watch YouTube videos. Don't think you have mastered anything because the markets are always changing.

We have the best team in the game and now you are apart of it! Welcome to Team PipPhenes we hope to earn your loyalty with the rest of our members.



please always feel free to give us suggestion.

PipPhenes Information!, [30.11.16 23:12]
DD: =

Draw Down.

Ex. When a trade goes against you for awhile before turning around (planned)

PipPhenes Information!, [09.12.16 21:31]
Alot of misinformation floating around so we want to kindof clear things up a bit...

Due to regulations starting to take place in this industry on brokerages you may no longer be able to trade Forex in about 6mo-8mo... You will need $50,000 and 25:1 will be the largest leverage you can use. Binary options may end.

This will be a massive change in this industry. We will be working to build a structure where we will still be able to do what we do. This will cost us a few hundred thousand dollars... We will be able to put everyone in one account essentially a PAMM account... This takes licensing and connections...

So there are six months left to really make some money trading like this!
join the group... 2017 will be the start of the most amazing experience you will ever have with us.. We will be doing 10X what we are now to ensure profits...

We have some on the site...

YOUR opportunities WILL BE GONE!
You will need $50k-$100k to effectively trade FOREX...

Luckily your with us!!!!

PipPhenes Information!, [09.12.16 21:32] if you need to contact us!

PipPhenes Information!, [19.12.16 18:52]
Quick reminder, we will not issue refunds on autopayments... You can message us to turn them off or preferably log into your account and turn them off... If you paied with paypal you can also turn auto renew off in paypal.


-PipPhenes Team