The most important and most common question traders ask is what leverage is the best for long term performance. While, XBTFX offers 500:1 leverage, we want to clearly and openly state that we believe such leverage is unsustainable, traders using such leverage should be ready to loose their whole investment. Of course, it is also possible to produce huge returns, but official statistics point that about 75% of all traders loose money.
We believe successful trading relies a lot more on risk management than being right about a trade. It is crucial to define clear maximum acceptable loss before placing a trade and we advise the use of stop losses for that. As a rule of thumb risking over 2% on a single trade is generally considered risky practice that usually leads to ruin. Keep in mind that traders that have lost 50% of their account balance need to make a 100% return with less capital to get the account to its break-even value.
We believe that clients are best served in the long term by using leverage of under 100:1 ideally 50:1.
We use this opportunity to show you this excellent study and article by DailyFX on performance : https://www.dailyfx.com/forex/fundamental/article/special_report/2015/06/29/forex-trading-using-trading-leverage-effectively.html
Please note that 40% of traders are profitable when using leverage under 5:1 and notice how that profitability % goes down with higher leverage.
XBTFX is a broker with real access to liquidity providers and as such we strive on having our traders do well and have their capital grow. XBTFX strives to provide good educational content to its clients and protect their capital.
This post has been prepared by XBTFX.
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