How Much Money To Trade
At this point, you know all about leverage and how it can impact both profits and risks. The question you should now be asking yourself is “how much should I trade”?
In the past, currency trading was generally done according to specific amounts known as lots. Lots can be broken down into different types:
|Type of Lot||Units|
Today, you do not actually have to trade using lots and can in fact trade any amount you want. However, the concept of lots is still regularly used in trading and helps you to better understand the amounts being exchanged.
As we saw in the last lesson, trading becomes more interesting when you trade larger amounts. When you combine the amount you have to trade with leverage, you can transform your deposit of a nano lot into a mini lot with relative ease.
So How Much Should I Trade?
Deciding how much you should trade is a decision you have to make. You need to take into account your balance (the amount of money you can trade), your objectives (how much money you hope to earn), and your willingness to accept risk (how much money you are willing to risk losing).
If you have a balance of $100 and you want to grow this amount as big as possible as quickly as possible, and you do not mind losing your $100, then by all means, add a large amount of leverage to the trade. However, if you don't want to risk losing even $1 of your $100, than you should use no leverage, or only a small amount of leverage.
In other words, how much to trade is up to you.