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Effect of ESMA leverage limit when trading in percenta


 Sander Burggraaff, Independent SAS consultant

 Wednesday, June 27, 2018

So I’ve been trading in Forex since 2012 and I’ve always had 100:1 leveraged accounts. I never paid much attention to the leverage limit because I’ve always traded in percentages. I use MT4 and that gives me the option to calculate the value of a single pip move in the currency of my account. So for instance I place a trade with a 100 pips stoploss and calculate the lot size so that I don’t lose more than 10% of my account on that single trade. In that sense it doesn’t matter if I’m on a 50:1, 100:1 or 200:1 account. The lot sizes are different but my risk stays the same. (The only thing I wonder about is if there would be a difference in the commission fee my broker charges. I have to ask them that.) It allows me to do things that some people might call extreme. For instance, I run a strategy that risks 40% percent of the account on single trades with a 100 pips stoploss. It has only one open trade at a time. At the end of the week it always closes out, so no open trades during the weekend. I can do this safely. I never run into margin calls and even under the new ESMA 50% margin close out there is no problem. However, if the leverage of my account is lowered to 30:1 I expect to run into problems. Maybe I’m allowed to open that trade with a lot size that is 3.33 times higher, but I expect that the trade would be closed out before hitting the stoploss. Am I right in assuming this? Can anyone shed some light on this?


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