Does anyone have any suggestions on a leverage limit?

Many FOREX brokers allow up to 200:1 leverage. My trading strategy is to take just very small gains (3 or 4 pips at a time) and set the stop losses way out there just to avoid a total wipeout. I never trade on Fridays either and of course close out before the market closes.

Because of the giant stop losses, I am only comfortable with around 20:1 leverage or maybe 30:1.

In other words, with a $500 margin account balance, I would only consider buying 0.1 lots of EURUSD (10,000) at a time; 0.2 lots with $700; 0.3 lots with $1100 and so on...

Does anyone out there use the same strategy as me and feel comfortable with higher leverage like 40:1, 50:1 or even higher?

Answer
As you indicated, it is not just your leverage that you need to take into account...it is also your margin level that is important.

When I am drawn back to my technical analysis days I usually use a leverage of 40:1 unless I have a high probability setup occurring (based on pivot points and fibs). In that case I might go as high as 100:1.

Currently the majority of my Forex activity is based on conservative hedge trades (usually hedging the EUR/USD and USD/CHF). With my hedge trades I use a leverage of 400:1 and a margin of 10%. Hedging is awesome because the position can make profit regardless if the market goes up or down. I also get paid a daily interest payment, 7 days a week.

I have an analysis of the daily performance of 5 different hedge strategies over the past 500 days if you would like to see it. And these were all at 400:1 leverage and never anywhere near a margin call.

Paul

How to live without work with £150,000 ($310,000)?

Do you have any ideas how to invest this sort of money to create an income of £1500 ($3k) a month? Buying a property and letting it out, then taking a mortgage under it and buying another house? Forex? Stocks that pay good dividend? Some simple business?

Answer
With a conservative Forex hedge position an investment of $310,000 could generate $217.04 per day in interest earnings (7 days a week). This would be an annual interest of 25.55% for a total of $79,219.67.

This is based on the current swap rates on the EUR, GBP and CHF. Changes in a central bank's interest rates could cause this to go up or down.

In such a hedged position the daily interest would be earned regardless of the price of the underlying currencies.

I'd be happy to explain hedge trading further if it is of interest to you. It is also important to understand the risks associated with participating in the Forex, and actually, in any, financial market.

Drop me an email and I will send you a study that you may find interesting. pupp52@yahoo.com

Regards,

Paul