The first table shows the calculation of the required collater | LiteFinance
The first table shows the calculation of the required collateral and deposit change for leverages with a classic lot of 100,000 USD.
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Suppose that we are ready to start trading with a deposit of 1000 USD, with an acceptable risk per trade of 1% to the balance and an acceptable position drawdown of 1% with maximum portfolio diversification
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Now we will calculate the maximum size of positions that we can open and the risk per trade, subject to the above rules.
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In the table above, we see that with such risk management requirements, the optimal leverage on Forex is 100:1, since in this case we will be able to open 100 positions at once that meet our risk management rule, or several positions with a minimum risk.
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From this example, it is obvious that for trading with a lower leverage, you need to increase your deposit so that you can actively trade with the required level of diversification.
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You may say that this is a contradiction How does trading with a large leverage reduce risks? In fact, there is no contradiction. Liquidation risks do go down with higher leverage, provided that trading volumes remain the same.
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All the disadvantages high leverage we told of above relate to the psychology of a trader and violation of money management rules, which is why it is so important to work on your trading strategy and discipline in trading.
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Then the high leverage will not be a problem and will not lead to losing the deposit.
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