Forex Trading Tutorial: You or Your Broker

Forex Trading Tutorial: You vs. Your Broker

After being informed earlier in our forex trading tutorial about the other side of leverage, we would like to emphasize once again that there is no free lunch here. Leverage can be your worst enemy. A 400-1 leverage could mean that even a small move against your position could erase your account clean.

From the broker perspective, your lost is his gain. Forex firms make their own markets by deriving the bid-offfer price to their clients. They do business on the probability assumption that as most highly leveraged traders (like you) lose, then it’s good business to take the opposite position to you. This is still a speculation remains to be seen because there is no evidence to support such claims but there’s a concerned worth mentioning.

Let’s say, when a client buys Dollars against the Yen, the broker sells short the Dollar. When the client covers the position (either for a profit or loss) the broker is taken out also. If the client wins the broker loses and vice-versa. This is how the leverage game is played. Understanding how leverage works is cruicial in deciding on which broker to choose for your trading.

Usually the broker has a statistical advantage by offering high leverage trading platform.

Becareful with huge positions on a limited amount of capital because the odds of gaining even for the best and most talented traders are less.

It is important therefore to have an understanding about leverage on forex and how it works. If you want to make money currency trading, give yourself a fair chance and our forex trading tutorial advice is not to go more than 10x. What’s the hurry to make money?

You must overcome greed and impatience to become a successful forex trader. Nothing worthwhile in business or life can be achieved overnight. One of the most popular forex trading systems out there is based on very low leverage.

This forex trading tutorial neither encourages nor discourages forex trading at super high leverage. That’s a personal decision, but a decision that can only be made sensibly with a professional understanding of all the implications of leverage and what they mean to your chances of prospering at forex trading. It’s probably fair to say that unless you have a professional understanding of leverage that your chance of even surviving at forex trading is slim to none.