[JLJ]

I always hear about using leverage for Day Trading, but I don't hear leverage mentioned re: swing trading. Is it not permitted by brokers (since they're basically lending you the money)? Or is it because leverage is too risky when you hold a position longer than a day, so people just _don't_ use it, even though they could?

[markl67]

Are you talking about margin requirements? There are different margin requirements for "patterned day traders" which is a term used in stock trading. I think firms have different rules/requirements regarding futures trading for those who employ stops and don't hold overnight vs. those who do. I'm not sure if these requirements are regulatory or firm risk management related.

[brownsfan019]

In swing trading your basic options for buying/selling in a retail account are:

1) 1-1 ratio = You have $50k in your account, you can 'spend' $50k in trades.

2) Use margin (ratios vary) = You have $50k in your account and your broker allows you to use margin which increases your trading power but you also pay interest for that privilege.
Here's what Open ECry charges as an example.

Outside of that, you'd have to go the prop firm route to get even more buying power.

[SIUYA]

Generally a way to think about them
Futures trading.....
the leverage is effectively given to you by the exchange and all trades are centralised. The margins they set allow you to leverage up.
CFDs, Swaps, FX....
leverage is given by the broker whereby there is no central clearing house and you trade with/against the actual broker. These are effectively continuous betting accounts whereby the account rises and falls depending on what happens with the underlying bet.
Stocks....
as you have to pay 100% for the stock through the exchange, the broker, or your margin lender effectively lends you this money and you owe them. (different but similar to going to the bank and borrowing the extra money and then going to the broker. eg; go to the bank with 50,000 deposit and say you wish to borrow another 100,000, then go to the broker and buy 150,000. But in this case the broker effectively is the bank. For this they will charge you an interest rate.)

As BrownsFan said, really understand what the broker, margin lender, spread better is offering.
It may result in different taxation positions and exposures. This can also delve into the world of understanding the differences between segregated accounts and non-segregated accounts.
The brokers should be able to completely explain this to you. If they dont adequately do this then either they dont know themselves or they are hiding something. There is no substitute for doing your own homework.

[JLJ]

thanks for the input, folks. Sounds like I should ask my broker.

[brownsfan019]

I would assume any retail broker offers margin, so that will probably be the quickest way for you to get more buying power. I used my margin quite a bit when I was swing trading to maximize my exposure. Of course, losses will sting even more - not only the loss of principal but you are also paying interest on that borrowed money.

[flatbush]

What I see is that leverage IS available for swing trading, but most brokers will only give you half as much, because, yes, it is riskier when positions are held overnight. My broker gives 20:1 leverage for day trading, for example, but only 10:1 for overnight.

Originally Posted by JLJ »

I always hear about using leverage for Day Trading, but I don't hear leverage mentioned re: swing trading. Is it not permitted by brokers (since they're basically lending you the money)? Or is it because leverage is too risky when you hold a position longer than a day, so people just _don't_ use it, even though they could?

[henryduncan12]

There is a good article titled "Trading Using Leverage" at about.com. I think, it will be more helpful for you.

Source: Trading Using Leverage