Take a $1000 starting balance. If you were to trade $200,000 in EUR/USD, a mere 10 pips move against you would result into 20% of your account equity getting wiped out. First practice on your forex demo account. Know candlestick patterns. Learn about fibonacci retracement.

Suppose the spread is only 3 pips. In fact, you are having a trading cost of $60 just by entering the trade and you are down 6% on a trade.

This is much more than any permissible loss. Trading position sizes this big in relation to your account size means that you are essentially trading yourself into a corner. Any market noise is bound to wipe out your account size.

Forex brokers love this. As this is easy money for them. If you are overleveraging your trades, than you may as well hand over your money directly to your forex broker instead of losing it in a trade.

The retail investor should definitely not use more than 10 times. It means if you have a starting balance of $1000, the price would have to move 1000 pips against you before your account get wiped out. Professional money managers don’t use more than 2-5 times leverage level.

So with a leverage level of 10, you get more room to maneuver and it gives you more flexibility. Choosing the right amount of leverage is the first critical step in maintaining your flexibility in the market.

Flexibility is critical for you if you want to survive in the forex market long term. Flexibility in trading means giving you options. Options to enter into a trade! Stay in it and get out of it.

By becoming overexposed to any one position, you essentially remove options from your table until you are faced with an all or nothing trade. In the forex world, your survival is measured in days not years.