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High-leveraged trading can make you a millionaire overnight. But it’s also a double-edged sword: you can blow up your account fast. Of course, your goal is to become rich, pay off your financial debts, buy a new home and ditch your Civic for a Lamborghini. High Leverage Stock Trading

Still, to be clear, 90% of stocks traders lose money. So, as much as you can become pretty rich by trading stocks, it’s easier said than done. In this article, we’ll explain how to make stock trading work for you, especially by using high-leverage. High Leverage Stock Trading Career

What is Leveraged Trading?

Leverage, according to physicists, is a mechanical advantage. The result is that a small input can lead to a greater output. In stocks trading, leverage is magnified “trading power.” It’s expressed as a ratio—X:1.

For example, you might have $1 in your trading account. But you can borrow ten times the amount. In that case, your leverage is 10:1. Many trading websites support leverage trading through a margin account.

A little refresher: you can trade stocks without borrowing money. This is called spot trading. If you want to borrow money, you need to navigate to a margin account. It’s called margin trading because you need margin to borrow money.

When you borrow 10:1, then $1 is your margin. In other words, your capital is the margin. It’s also known as collateral because when the trade goes against you, it’s the money your broker deducts to cover the leverage they gave you.

 Choosing a Trusted High Leverage Broker

Now that you know how leveraged trading works, next is to find a trusted broker. In The UK, you have two options. You can use a broker licensed in the UK. Or you can choose a trading platform based offshore.

Your money is more secure at a British stock trading platform. But you’ll be limited to a leverage of x30. On the other hand, you can benefit from trading with a higher leverage if you opt for a foreign site.

That being said, the amount of leverage on offer isn’t the only thing to consider when choosing a high leverage stock trading platform. You have to check the assets you can trade, fees, payment methods, mobile support, and a broker’s reputation.

Pro tip: determine what you want in a broker before you make a decision. If you’re after low fees, look for platforms that charge close to zero. If you’re after trading FOREX and Bitcoin, then ensure these assets are available.

Start with Decent Capital

It’s true—you start small if you’re a beginner trader. However, the amount shouldn’t be too small to hamper you from making money through margin trading. Picture this. You have $100 in your margin trading account.

You want to make money quickly, so you result to trading $10 with a x10 leverage. Each trade will give you $100 to work with. But if the market goes 10% against you, the broker keeps your $10 margin. That means you can blow your account with just ten wrong trades.

If you have a $10,000 account, though, you can trade much longer as long as you keep your trades small. Speaking of which, many experts recommend beginners to trade using 1% to 2% of their capital.

If you have $10,000 in your account, a good place to start is $100 to $200. If you have $1000, you shouldn’t trade more than $20 at a time. Of course, these are guidelines. How much you spend per trade depends on your risk tolerance and level of expertise.

 Learn about Risk Management

The last thing you want as a high-leverage stocks trader is to bankrupt your account. As such, it’s highly important to manage every risk you take, whether it’s short-term or long-term. Fortunately, there are lots of tools to help with risk management.

For starters, every trading platform explains candidly the margin required to take trades. Generally, here’s what you can expect. If you have no leverage on a $100 trade, a 1% change in the market will affect your account by 1%.

If you using leverage, this is what happens if the market changes by 1%:

  • 5: 1—5%
  • 20:1—20%
  • 50:1—50%
  • 100:1—100%

In light of that information, you should use stop losses to manage your risk accordingly. Precisely, you don’t want to lose 100% of your margin. So, if you’re not prepared to lose 100% of your money when the market moves by 1%, then use a small leverage or tighten your stop loss.

Another way to manage risk is by adding collateral to your account. Let’s use $100 as our margin. With a 10:1 leverage, you risk losing your entire collateral if the market moves 10% against you.

To avoid this, you could add another $100 to your margin account. In that case, you can also only get liquidated if the market moves 20% against you.

Manage your Greed

Managing risk is important but so is limiting your greed. Every trader has an appetite for profit. But if you let it overwhelm you, then you risk losing money in the trading game. You can limit greed in two ways.

First, pick a trend and stick to it. Second, decide when to take profit. Some people try to make money all the time, regardless of whether the market is bullish or bearish. The problem: you risk getting stopped out by trading on the wrong trend.

On the other hand, failure to take profit at the right time can also be costly. Sometimes you want to be patient and only take profit at the bottom or top. But then the market can close earlier than you expected and reverse.

Your Turn

High-leverage trading can be profitable. But only if you’re extremely careful. First, learn the fundamentals of swing trading. Learn how margin trading works so that you can increase the profitability of your trades. Then use the tips shared above to make you a consistently profitable trader.

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Ali Raza

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