Trading with high leverage is one of the most common errors made by new forex traders - here’s why lower leverage is actually the key to success if you’re just starting out.
At BluFX, our leverage is 3:1. Some traders may see this as extremely low and might argue that it limits your ability to make good trades - but in fact, we’ve found that low leverage actually helps traders mitigate loss. Here’s how…
3 Benefits of Using Low Leverage
1. Low leverage = less loss
One of the most important things to understand about leverage if you’re new to trading is that it can be as risky as it can be beneficial. While it can amplify your gains, it can also amplify your losses. So it’s crucial you understand leverage before beginning trading.
If you placed $1,000 for $100,000 - and the investment rises in value to $101,000, you would make $1,000 profit (100% return on your initial margin, $1,000). Great!
However, this is the catch: if the investment decreases in value by $1,000, you would lose $1,000. You can do the math: your losses would be 100%.
So, put simply: if you have lower leverage, there’s far less risk of loss. And when you do make a losing trade, the low leverage means you can continue trading for longer as you won’t have lost all of your capital!
Essentially, the more leverage you use, the less room you have for the market to move before a margin call (you can read more about this on our Margin blog). This is why many successful traders use low leverage when they start out.
2. Low leverage = less to pay up front
With lower leverage, there will usually be less to pay up front to the broker. At BluFX, our lower leverage means that this is the case. Our two subscriptions offer traders the chance to risk a limited amount of personal capital for a fully funded account.
To start trading with us, you’ll need to pay the following prices for your subscriptions - and that’s it!
- $99 for a Lite Account
- $249 for a Pro Account
Want to find out more about our two subscriptions? Read our Pricing page.
3. Low leverage = trade without huge risk
Many successful traders use low leverage, then, as there is significantly less risk involved. This is why, at BluFX, our leverage is 3:1, which we set up in line with our analysis of vast amounts of trader data.
Our leverage is set at this level so it allows traders with developed strategies to trade with low risk and consistent returns when using large amounts of trading capital.
So, if you’re looking to start trading without massive personal risk, low leverage is the right option for you. If you’re looking for a refreshing alternative to opening an account with a broker, or joining a traditional prop firm, why not consider joining BluFX? We offer low leverage, no hidden costs or exams, plus zero loss liability.
Read more about the different aspects of trading with BluFX on BluFX Margin Explained.
Want to know why you should join BluFX? Read more here...