I am a forex trader at Octafx with a 40 USD floating rate balance, and a leverage of 1:200. So far, I have only been trading with a 0.01 lot size due to safety reasons to avoid margin calls. In order to increase my lot size for higher profits, what would be the new leverage that I can use to ensure my trading remains safe and comfortable?
@ Musliansyah:
I assume you are trading 0.01 lot on the XXX/USD pair (EUR/USD, GBP/USD, AUD/USD or NZD/USD). With 1:200 leverage, the margin required is 0.5% of the contract value or approximately 0.5% x USD 100,000 x 0.01 = approximately USD 5.
Remaining funds = USD 40 - USD 5 = USD 35.
The value per pip for the XXX/USD pair 0.01 lot is USD 0.1.
Pip resistance = USD 35 / USD 0.1 = approximately 350 pips.
In my opinion, this resistance is a bit risky, so it is best not to increase the lot size. For example, if you increase the lot size to 0.02, the resistance = USD 35 / USD 0.2 = 175 pips (smaller).
In this case, you should increase leverage, for example 1:500, so that the margin is smaller and the resistance is greater.
With 1:500 leverage, the margin required is 0.2% of the contract value or approximately 0.2% x USD 100,000 x 0.01 = approximately USD 2.
Remaining funds = USD 40 - USD 2 = USD 38.
Pip resistance = USD 38 / USD 0.1 = approximately 380 pips (larger.
Another alternative is to add funds, so that with a larger lot size the resistance is still large enough.