Sunday, May 20, 2007
What is considered a decent margin in Forex? -
I guess everything over 50:1 should be defined as quot;suicidalquot;. And...I am asking mostly for short position in daily trading. In the long term, still 10:1 seems risky. Thanks! On the long term I believe 2:1 is enough. On day trading I use around 30:1. It really depends on the strategy and stop loss you use. Margin changes the amount of your potential profit and the amount of your risk (or potential losses) quite dramatically. A rule of thumb is that the risk-reward ratio should be a 1:2 ratio or even higher. Some traders use a minimum of 1:5, but this high ratio will limit your trading ability. Beginning traders may wish to use a 1:3 risk-reward ratio. Do the calculations. Decide if your potential reward is worth the potential risk. If not, look for another trade.
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