Before You Trade With High Leverage

Originally posted at forexfactory on May 13, 2011:

Ok, so you want to risk 15% of your account on a trade. Got it. Do you know what type of trade you want to place? Do you know if you want it to be a day trade, swing trade, position trade? Do you know if you want to position size 15% of your account every 20 pips? Or 15% of your account every 200 pips? What type of move are you trying to catch? Do you want gradual trend, or just quick volatility? Can you even handle a 15% drawdown on your account emotionally?

What type of move do you want to catch? You can look at a chart and take a look at the market moves and take your pick on which ones you want to catch in the future. Once you decide which movements you want to catch it is all about getting into the head of the market participants generating the order flow. So if you wanted to short EUR/USD at 1.4942, then you start trying to build a system around catching those trades. It doesn’t include any moving averages or trendlines or anything like that.

Before you start risking 15% of your account on one trade, you better have a near perfect understanding of what order flow will be generated after you establish your position. In other words you should be placing trades that are near impossible to lose. In other words, the trade is won before it is placed because there will be massive order flow coming into the market. So you have the whole scenario and market participants planned out in your head, who will do what that will take your trade into the profit.

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