How Leverage Affects Transaction Costs
Besides increasing the strength of your losses, leverage also has another way of killing you. It’s a much slower kind of death, though, kind of like being continually occurring open to view to high levels of radiation. Most traders don’t see it coming till they are dead.
This killer I’m talking about is the combined transfer cost of using high leverage
Not only has the leverage increased the strength of your losses, it also increasing the strength of your transaction costs as a percentage of your account.
If you are losing in trades , your balance will shrinks and as your balance shrinks, your leverage increases. As your leverage increases, your transaction costs will eats away faster at the little money you have left. It’s a silence slow death we are talking about here.
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