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The Leverage-Loss Matrix

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1The Leverage-Loss Matrix Empty The Leverage-Loss Matrix Mon Feb 02, 2015 12:04 am


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The low margin requirements in the forex markets make everyone’s what-if analysis yield forecasts with 1000% growth annually. What those forecasts fail to account for is the multiplying effect of leverage during periods of consecutive losses.

What’s the ultimate worst case scenario? Consecutive losses. Knowing how many consecutive losses your system is likely to sustain is the key to capital conservation. Examples of leverage: 1:1 = one $100K contract per $100K in capital. 20:1 = 20 $100K contracts per $100K in capital.
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The fact that you need to go to bed or spend time with your family does not stop the forex markets from operating. In other markets you can trade a specific window that usually lasts 6-10 hours, which is physically manageable. Forex, on the other hand, demands 24 hour monitoring. That can be accomplished through automated trading systems or, less optimally, through pre-set stop and limit orders or physical monitoring of a trade.


“No commission trading” is a marketing slogan many dealers offer as a perceived benefit of forex. But the fact that there is no commission does not change the high level of transaction costs paid to dealers through the bid-ask spread.

There is no doubt that the liquidity, leverage, convenience, and transaction costs found in the forex markets are great tools for investors – but not always. Just as easily as these tools can be used for wealth creation, they can be misused for wealth destruction. The novice investor destroys wealth, and the sophisticated investor creates it.

Short info about me! I am a forex, stock market trader, and software developer at the same time. I developed several Trading Robots (Expert Advisors) for trading on Meta Trader 5 trading platform.

* Forex Robots(Expert Advisor)for MT5 trading platform. [You must be registered and logged in to see this link.]

2The Leverage-Loss Matrix Empty Re: The Leverage-Loss Matrix Sat Mar 25, 2017 7:20 pm



Don't limit yourselves - take the commercial leverage to the max that the broker offers. And then, just follow money management. That's all.

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