Managing Leverage in Forex with certainty and ease

Last week I wanted to scare you just a little bit with the potential pitfalls of Forex leverage. The reason is simple: I am interested in you learning Forex so well that you are able to achieve your financial freedom without risk.

I am not a broker and I will not tell you that “everything with Forex is a bed of roses.” I will not tempt you with a leverage off 400: 1 because I know that this can seriously adversely affect you.

I am an educator, I have created the first seminar in Italy about Forex and I want to teach you the fundamental strategies that will set you on your path to the stress-free trading life that you deserve.

Today, instead, I want to show you how to manage the dangers of leverage with Forex. Understanding the dangers are essential because this will allow you to multiply your earnings risk free.

To better understand this article – and the previous one – you should have read the free ebook on forex that I wrote. If you have not already read it, you can download it from here

Ways to avoid being hurt by Forex leverage

Here are three key things you need to avoid getting hurt with Forex leverage:

  • Before you start with real money, learn to make profitable trades virtually
  • Before you start with real money, learn to make profitable trades virtually
  • Before you start with real money, learn to make profitable trades virtually

Did you get that? I could write this rule 1,000 times over and over to make sure you are listening. It is that important! Trading virtually means using your own trading platform as well as virtual money, like in Monopoly. Everything else is real, you make real trades with Forex in real time. The only difference is that you do not use your money. Think of it as a “gym” or a simulator.

It’s just like being a jet pilot. You have to spend hours and hours in a simulator, learning everything. You need to be able to deal with every possible situation that could happen when flying. Pilots treat the simulator exactly like a real plane. This is exactly what you must do with virtual trading. Pretend that you are trading with your real money.

Many people tell me, “Unless you trade with real money you can’t know how you will react in positive or negative situations”. This is nonsense.

So trade as much as you can virtually. And until you are profitable, consistently, don’t open an account.

Repeat after me: “I will keep trading virtually on Forex until I continually get the optimum return that I want. Only then will I open an account”

Having said that here are other protective strategies you can enply to safely manage leverage with Forex:

  • Start with a leverage of 1: 1 or 2: 1. If you can be profitable with this low leverage then switch to a higher one. Don’t use it to replace preparation, on the contrary, consider it as a bonus for your preparation. Just like at flight school: first you learn how to fly a single-engine then a twin-engine and finally a jet. We don’t immediately start with a jet because they go faster and they need more first hand experience.
  • Try to quickly build a significant capital. Let’s say that the objective could be to have 50,000 Euro in your account. With this figure, even without being careful like the professionals traders that I mentioned in the previous article, you have a good range and you should not find yourself in a margin call situation.
  • Specialize in only a few techniques. For example the techniques that AB Forex teaches. This is generally true for all of Forex trading. There are so many things you can do and so many currency pairs that you can follow. But my advice is to choose a few simple strategies (breakout or trading news), and learn them well. If you learn these well the risks of leverage decrease because you’ve prepared yourself in advance.

Trading is not a show of strength or virility. Nor is it like playing at the casino.

It’s a particular type of business, and as such should be treated like one. With seriousness, commitment and preparation.

If you do this, Forex will give you a lot of satisfaction in a short time.

Until the next appointment with your financial freedom,

Alfio Bardolla

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