NO!

If you can buy 100, 000 euros with $1,000 you are using a 100 to 1 leverage, period!

How much money you have in your trading account or under your mattress is totally irrelevant!!

Alright I am done, nothing more to add.

The opinions expressed in these forums do not represent those of C2, and any discussion of profit/loss is not indicative of future performance or success. There is a substantial risk of loss in trading. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. You should read, understand, and consider the Risk Disclosure Statement that is provided by your broker before you consider trading. Most people who trade lose money.

NO!

If you can buy 100, 000 euros with $1,000 you are using a 100 to 1 leverage, period!

How much money you have in your trading account or under your mattress is totally irrelevant!!

Alright I am done, nothing more to add.

You are right about that! One of the things to look for when evaluating system risk is per trade drawdown. Letâs say there is system with high return (over 40% a year) and a 30% max drawdown. 30% is not such a bad max drawdown for a really high return system. But then you look at the per trade drawdown and see that it is often 10-15% and these trades were not hedged by other negatively correlated trades. This is the type of system that will likely have much bigger max drawdown in the future.

Max drawdown, per trade drawdown, & max leverage used are all things to consider when evaluating a system.

2 Likes

You say the account balance doesnât make a difference in calculating leverage yet you use the account balance to calculate your stop. You canât have it both ways. Either itâs a 2% stop based on the minimum margin required or you need to calculate leverage based on the account size.

2 Likes

EthosPortfolio:

You say the account balance doesnât make a difference in calculating leverage

I have $100 K in my account. I buy $10K of Google shares.

Therefore, my leverage isâŚ 10 to 1 (size of the position divided by account equity).

This is how absurd it can get when we use the wrong, home-made and totally fabricated definition of leverage.

MaxTor:

You are right about that!

Glad to hear that.

That shows that âlow leverageâ systems are not any safer than all the other systems.

No, there is no leverage because you have enough cash in your account to cover the costs of the shares. If you had $10k worth of cash and bought $100k worth of google then you would be 10:1.

LiveForexSignals:

EthosPortfolio:You say the account balance doesnât make a difference in calculating leverage

I have $100 K in my account. I buy $10K of Google shares.

Therefore, my leverage isâŚ 10 to 1 (size of the position divided by account equity).This is how absurd it can get when we use the wrong, home-made and totally fabricated definition of leverage.

Whatâs wrong with you?? Size of position = $10,000 / size of equity =$100,000. Is 10,000 / 100,000 = 10x ??? What kind of mathematics is that? If you have 10,000 position size and 100,000 equity then you have 0.1 x leverage ( 10,000 / 100,000 = 0.1). How do you even trade with this kind of mathematics?

If with any forex position the leverage used the leverage used is always the max leveraged allowed by the broker (lets says 100x) then how does c2 get stats like âaverage leverage usedâ and âmax leverage usedâ. All the forex systems would have the same stat for amount of leveraged used (100x).

Also most equities brokers offer 2x leverage on equities in a margin account. Does that mean an equities trader is using always using 2x leverage, even if total positions are less than the equity in his account? Is the person with $100,000 who buys $10,000 Google using 2x leverage if the margin requirement is $5,000?

LiveForexSignals:

Glad to hear that.

That shows that âlow leverageâ systems are not any safer than all the other systems.

I just agreed on equity systems many times have high per trade drawdown. High leverage systems blow up much more often.

EthosPortfolio:

No, there is no leverage because you have enough cash in your account to cover the costs of the shares

Wait a minute, then how do you calculate leverage, exactly?

Give us an example please.

LiveForexSignals:

EthosPortfolio:No, there is no leverage because you have enough cash in your account to cover the costs of the shares

Wait a minute, then how do you calculate leverage, exactly?

Give us an example please.

As you said in your post : size of of positions / account size. But $10,000 / $100,000 does not =10. Itâs 0.1 as in 0.1x leverage!!

MaxTor:

If you have 10,000 position size and 100,000 equity then you have 0.1 x leverage ( 10,000 / 100,000 = 0.1)

No, in this example NO leverage was used, you bought the stocks with your own money.

Leverage is zero (well, 1 technically).

A 1 to 1 leverage means no loan was involved in the transaction.

EthosPortfolio:

No, there is no leverage because you have enough cash in your account to cover the costs of the shares

@LiveForexSignals Isnât that what I said?

Iâm out. I didnât want to get sucked into a worthless debate but I did. Iâll tell you I would have trouble investing my money with any manager who believed that you can leverage as much as you want without any additional risk. I wish you luck on your strategies that employ that philosophy.

Have a great weekend.

2 Likes

LiveForexSignals:

MaxTor:If you have 10,000 position size and 100,000 equity then you have 0.1 x leverage ( 10,000 / 100,000 = 0.1)

No, in this example NO leverage was used, you bought the stocks with your own money.

Leverage is zero (well, 1 technically).A 1 to 1 leverage means no loan was involved in the transaction.

Just look at this system: Nasdaq Momentum https://collective2.com/details/126548162

According to C2 stats the average leverage used is 0.55 and the max is 0.99. How do you think they calculated that?

1 Like

MaxTor:

According to C2 stats the average leverage used is 0.55 and the max is 0.99. How do you think they calculated that?

I donât dispute that, because thatâs the definition of leverage C2 uses.

EthosPortfolio:

Isnât that what I said?

Yes you did, but if NO leverage was used (which is true), how come it still has a value (0.24 in your example)?

See the problem here?

Anyway, have a good weekend too.

LiveForexSignals:

MaxTor:According to C2 stats the average leverage used is 0.55 and the max is 0.99. How do you think they calculated that?

I donât dispute that, because thatâs the definition of leverage C2 uses.

If thatâs the definition that C2 uses and we are on the C2 forum then thatâs what all the forum posters are using when discussing leverage vs risk.

1 Like

LiveForexSignals:

Yes you did, but if NO leverage was used (which is true), how come it still has a value (0.24 in your example)?

Huh? Where did I calculate 0.24? It would have calculated to 0.1. Anything under 1 means no leverage.

This discussion is crazy.

I feel that it can actually be hard to keep things straight. Names often get changed etc. Identity theft is not a joke Jim.

EthosPortfolio:

Where did I calculate 0.24? It

Sorry, 0.1, not 0.24, and I was quoting Ethos (sorry for the mix up), he wrote:

âIf you have 10,000 position size and 100,000 equity then you have 0.1 x leverage ( 10,000 / 100,000 = 0.1â

If you have no leverage (you buy without a loan), then leverage is zero (some traders prefer to use 1 to 1 leverage, also a correct way to express no leverage).

So if zero leverage has a value of zero (or 1), how come you find 0.1, even though zero leverage was used(you bought Google shares with your own money)?

HmmmâŚ

LiveForexSignals:

EthosPortfolio:Where did I calculate 0.24? It

Sorry, 0.1, not 0.24, because you wrote:

âIf you have 10,000 position size and 100,000 equity then you have 0.1 x leverage ( 10,000 / 100,000 = 0.1â

If you have no leverage (you buy without a loan), then leverage is zero (some traders prefer to use 1 to 1 leverage, also a correct way to express no leverage).

So if zero leverage has a value of zero (or 1), how come you find 0.1, even though zero leverage was used?

HmmmâŚ

Thatâs my quote. Yes 0.1x leverage would be used. And thatâs how C2 calculates it.

And just out of curiosity how did you calculate that 10,000 / 100,000 = 10x. One would think a forex trader has basic mathematical skills.

1 Like

Ugh. Because anything under 1 means no leverage. Canât understand what is so hard about understanding that. 0.5 means your only using half your cash. 2 means you are double leveraged.