Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

JLJ

Leverage Only for Day Trading?

Recommended Posts

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?

Share this post


Link to post
Share on other sites

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.

Share this post


Link to post
Share on other sites

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.

Share this post


Link to post
Share on other sites

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.

Share this post


Link to post
Share on other sites

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.

Share this post


Link to post
Share on other sites

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.

 

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?

Share this post


Link to post
Share on other sites

I have read this series of articles pertaining to leverage. The philosophy that for traders "Leverage is good, and more leverage is better" is maintained without reservations until the article "Leverage: Friend or Foe".

 

The author does not consider that a prop firm may give a lot more leverage. For daytrading, my broker gives 20:1 for Equities and Options.

 

After reading these articles, I wondered of there could be such a thing as TOO MUCH leverage.

 

 

 

 

 

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

Share this post


Link to post
Share on other sites
I have read this series of articles pertaining to leverage. The philosophy that for traders "Leverage is good, and more leverage is better" is maintained without reservations until the article "Leverage: Friend or Foe".

 

The author does not consider that a prop firm may give a lot more leverage. For daytrading, my broker gives 20:1 for Equities and Options.

 

After reading these articles, I wondered of there could be such a thing as TOO MUCH leverage.

 

You mentioned your broker gives you x20 buying power (leverage).

 

What broker do you use?

Share this post


Link to post
Share on other sites
I have read this series of articles pertaining to leverage. The philosophy that for traders "Leverage is good, and more leverage is better" is maintained without reservations until the article "Leverage: Friend or Foe".

 

The author does not consider that a prop firm may give a lot more leverage. For daytrading, my broker gives 20:1 for Equities and Options.

 

After reading these articles, I wondered of there could be such a thing as TOO MUCH leverage.

 

But I'd like to know what broker that offers you 20:1 leverage Flatbush?

Share this post


Link to post
Share on other sites

If you're especially keen to trade with leverage, then you'll probably find it easier to obtain by focussing on instruments that a) are highly liquid, b) don't gap (24 hour session, or Cash plus Globex sessions), c) cannot lock limit.

 

This means focussing on instruments like stock index futures. As a daytrader, for example, you can readily control a single E-Mini S&P contract, which recently has had a value of between $60 and $70k, with about $500 in your brokerage account. Now I'm not suggesting that you should do that . . . but it gives you a good idea of where leverage is easy to come by.

 

Hope that's helpful.

Share this post


Link to post
Share on other sites
If you're especially keen to trade with leverage, then you'll probably find it easier to obtain by focussing on instruments that a) are highly liquid, b) don't gap (24 hour session, or Cash plus Globex sessions), c) cannot lock limit....

 

that's right..and keep in mind that because you have a stop does not mean it will always be executed at the price you specified...

Share this post


Link to post
Share on other sites
I have read this series of articles pertaining to leverage. The philosophy that for traders "Leverage is good, and more leverage is better" is maintained without reservations until the article "Leverage: Friend or Foe".

 

The author does not consider that a prop firm may give a lot more leverage. For daytrading, my broker gives 20:1 for Equities and Options.

 

After reading these articles, I wondered of there could be such a thing as TOO MUCH leverage.

 

For those with lack of discipline and risk management, anything greater than 1:1 is too much leverage.

 

Michael Toma, CRM

Share this post


Link to post
Share on other sites
that's right..and keep in mind that because you have a stop does not mean it will always be executed at the price you specified...
If someone has a problem with this then they might as well pack it in.

Share this post


Link to post
Share on other sites
it is like learning how to drive in a F1 racing car...learn how to drive before you try to break speed limits...

 

For day trades, I would second this.....learn how to drive the Volvo first (with paper money first)....then, when ya' get that down packed....consider the Ferrari....

 

But for swing trades...longer term trades....I advocate avoiding margin (but not leveraged ETFs which essentially have built in margin) alltogether...

Share this post


Link to post
Share on other sites
For day trades, I would second this.....learn how to drive the Volvo first (with paper money first)....then, when ya' get that down packed....consider the Ferrari....

 

But for swing trades...longer term trades....I advocate avoiding margin (but not leveraged ETFs which essentially have built in margin) alltogether...

Hey btw it is down pat, not packed.

 

Volvo, really? :)

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • Plandemic = Lies going in - lies coming out  (see covid posts herein starting circa Jan 2020 ... ) Not sayin’ I'm certain about this -  but the question is valid --- did Damar Hamlin really suffer from vaccine-induced myocarditis?  Vaccine-induced myocarditis must be considered in the differential diagnosis because the whole team is “100% vaccinated team” with experimental gene based vaccines  for COVID-19 - which have produced not a few similar conditions.  These serious reactions typically occur in older subjects but the young and  anyone at or near the tipping point of inflammation are vulnerable... and elite athletes are consistently at that tipping point - even more so deep into the season... Just saying - One of the symptoms of corrupted science is the conflation of ‘verifiable’ with actually ‘verified’.  Billions of people took vaccines - following the (FALSE) science that intentionally furnished them (FALSE)  scientific credibility - because they are verifiable.  But they were never verified.  They are still NOT verified !!!!  Brave new world where if your pharm inc. has the right connections  you can now profitably dispense just about any old Lagevrio with impunity way before it has been verified - as long as it’s ostensibly 'verifiable' Just sayin’... For alternaltive snicks and giggles see - https://www.naturalhealth365.com/covid-shot-makers-to-investigate-harm-caused-by-their-injections.html  (of course there’s no way they could ever manipulate their data... ) https://www.naturalhealth365.com/bombshell-report-reveals-massive-hypertension-signal-after-covid-shot.html https://www.naturalhealth365.com/mrna-covid-shots-are-result-of-u-s-military-program-run-by-darpa-evidence-reveals.html etcx ... and now in a related story , Africa, which has the lowest vaccinated %'s in the world... and also the lowest incidence and complications from covid in the world hm ??? - is in the crosshairs of the WEF this year ... = billions more for the pharmCartels... all under the guise of "equity"  (btw, "equity" is now a consistently applied centralization/globalist buzzword/tell... watch for it coming to a propaganda near you...just sayin)
    • $VKTX Viking Therapeutics stock breakout watch above 9.56 , see https://stockconsultant.com/?VKTX
    • $ACM AECOM stock flat top breakout watch , see https://stockconsultant.com/?ACM
    • $ATNM Actinium Pharmaceuticals stock breakout watch above 12.66 , see https://stockconsultant.com/?ATNM
    • $VKTX Viking Therapeutics stock bull flag breakout watch above 9.56 , see https://stockconsultant.com/?VKTX
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.