LitheInvestments'  Instablog

The title of this idea - Leverage Levels should be determined by Market Action not Account Size

Why would I think this? It's becoming more and more apparent to me that rather than have a set level of leverage it is better to base your leverage on how the market is moving, how fast it's moving, and what's moving it.

Look at the EURCHF right now.

Would it really make sense to use a lowball 2 to 1 or 3 to 1 leverage on this pair, when it's daily range is just 5-15 pips and swap gains of just 2 pips a week for holding the pair?

I'd argue strongly that high leverage would be the answer in this case, with the SNB artificially propping up the floor of 1.2000, why not hold the swap gains created by the EURCHF with good leverage? A 2 to 1 or 3 to 1 leverage level simply wouldn't be optimal to try and abuse swap gains in this case.

Look again at the Guppy aka pound/yen, and assume your usual leverage level..you might be giving away a ton to the spread simply for having a good level of leverage and find your account in a hard to escape hole.

My point is, you should primarily make your decision on leverage use based on what the market is doing rather than your account size and always making sure you don't break more than a fingernail ( such as 2% of your account) in the marketplace.

Good luck trading out there.