Many will be surprised to read because it is generally portrayed as counterproductive. When most people like to make a fortune, this seems like the only viable option. Despite the numerous dangers it poses, traders still prefer to use this tool. Many only select specific brokers for the leverage ratio being offered to customers. Thousands of materials have been written to educate why this should always be ignored. It is like Pandora’s Box that ought not to be opened at any cost. However, every coin has two sides and so does leverage. In this article, we are going to describe when this option is good for investment. It is recommended to start with an open mind because of the existing negative thoughts.
We are hopeful that many will be influenced and view this from a new perspective. Without more introduction, let’s begin when this tool should be used to broaden the success. Remember, you should not be encouraged to use it in every situation. Many circumstances appear profitable but they are short-lived. Know when a pattern is going to favor and only then consider implementing this method.
The size of the investment
When you invest a small amount of money, you can get significant help from the leverage. The top traders at the Mena region always take advantage of the Saxo bank group to trade with a small amount of money. But still, you should have at least $2000 in the account to trade the CFD market. If you trade with less than that, it will be impossible to make a consistent profit. Most of the time, you will be taking the trades with aggression and losing money. For this reason, find the balance point between leverage and your investment.
When the price movement is certain
Most investors only use analyses to predict the future. A smart investor should use all the necessary tools at his disposal to increase the success chance. Although this is hard to presume, if you know for certain the future direction, use leverage to increase the profit. After a few months, people begin to develop skills and can identify the probability of a favorable trend. Don’t let this skill go into waste. Start practicing with leverage in the demo account to understand how this will affect live performance. After gaining confidence, develop a strategy, and make the first move. Believe in yourself and hold the position until the very end. There’s no harm to use this formula if one is confident of the outcome.
During sporadic volatility
This is only applicable for short-term traders, i.e. scalpers or day traders. This community takes the most risks and endangers the entire capital frequently. Not only they have vast knowledge but precision as well. As they have to quit an order quickly, taking advantage of the erratic movement is profitable. Imagine a market where the chart is displaying choppy movements. Regular investors would stay away as this is risky but many find this situation promising. With enough skills and appropriate tools, leverage can be used to increase the outcome.
During favorable volatility
If you are confident this volatility is favorable, use this method. It is advised to double-check by analyzing the existing information, past news, and latest developments. If all seems to be in order, this is a good decision to implement. Brokers have this tool incorporated into the platform for a reason. Don’t let this opportunity go wasted rather use inappropriate instruments and multiply the reward. Experts use this small window and quickly multiply the initial profit. Without adequate knowledge, do not even think of using it.
After reading this post, don’t jump into action and start using it right away. Investors need to confirm the market circumstances before taking these big decisions. The mentioned contexts can arise but this does not offer certainty. Have a backup plan if this technique is implemented.