{"id":54945,"date":"2016-06-26T04:16:57","date_gmt":"2016-06-26T11:16:57","guid":{"rendered":"https:\/\/brookstradingcourse.com\/?p=54945"},"modified":"2018-03-25T03:52:15","modified_gmt":"2018-03-25T10:52:15","slug":"trading-leverage","status":"publish","type":"post","link":"https:\/\/www.brookstradingcourse.com\/es\/ask-al\/trading-leverage\/","title":{"rendered":"Ask Al: Trading leverage"},"content":{"rendered":"<h2>Trading leverage or margin needed<br \/>\n BPA trading room Q&amp;A: May 7, 2015<\/h2>\n<p class=\"content-box-green\">How much trading leverage do you use? For example, say the minimum initial margin on the Emini is $2,500 per contract, how much capital would you actually commit to trading this one contract?<br \/>\n <em>Video duration: 5min 5sec<\/em><\/p>\n<div style='position:relative;height:0;padding-bottom:56.25%'><iframe class='sproutvideo-player' src='\/\/videos.sproutvideo.com\/embed\/1c9adfbb1318e7cd94\/40bde8ba0f2f285b?playerTheme=dark&amp;playerColor=' style='position:absolute;width:100%;height:100%;left:0;top:0' frameborder='0' allowfullscreen><\/iframe><\/div>\n<p><\/p>\n<p class=\"caption\">You can also view this video on <a href=\"https:\/\/youtu.be\/WrnVQlja6og\" target=\"_blank\" rel=\"noopener\">Al&#8217;s YouTube Channel<\/a> if needed.<\/p>\n<h3>Multiple trading accounts?<\/h3>\n<p>That question comes up every now and then, and I\u2019m going to answer it in a way that\u2019s not satisfying, okay?\u00a0 If you\u2019ve been trading for a long time and you have some money, you can have a whole bunch of accounts. And I have a whole bunch of accounts, and some days I trade four or five different accounts. Some days I trade, you know, one or two accounts.\u00a0 And let\u2019s say on a day I trade one or two accounts, how much am I margining on that one account?\u00a0 I don\u2019t know.\u00a0 Sometimes, I\u2019m margining as much as 50 percent.\u00a0 But is that saying that I\u2019m using 50 percent of my <a href=\"http:\/\/www.investopedia.com\/university\/futures\/futures4.asp\" target=\"_blank\" rel=\"noopener\">trading capital as margin<\/a>?\u00a0 No, because I have six or seven other accounts, and so the percentage, is much less. So it depends by what you mean by \u201chow much are you using &#8212; how much of your account are you using for margin?\u201d\u00a0 It\u2019s not how much of my account am I using, it\u2019s how much of my total trading capital am I using.<\/p>\n<h3>Position sizing<\/h3>\n<p>And on any one trade, in general, I don\u2019t know &#8212; I don\u2019t even pay attention to it.\u00a0 I certainly don\u2019t want to be too high.\u00a0 And any one account, it would be unusual for me to be using more than 50 percent of the <a href=\"https:\/\/www.brookstradingcourse.com\/how-to-trade-manual\/trading-position-size\/\" target=\"_blank\">account for margin<\/a>.\u00a0 And all told, I probably don\u2019t want to be using more than 10 percent of the entire collection of accounts.\u00a0 I don\u2019t know, I would have to sit down and think about it. \u00a0I probably go more than that sometimes.\u00a0 That\u2019s for futures trading.\u00a0 Obviously, if I\u2019m trading in a stock account, I\u2019m perfectly happy using 100 percent.\u00a0 If I\u2019m trading options, let\u2019s say I\u2019m buying options, either puts or calls or spreads, and that, I usually keep the positions small. So on any one trade, I might risk no more than 3 percent of my trading capital.\u00a0 Even then, I probably don\u2019t trade even 3 percent.<\/p>\n<h3>So how much margin to use?<\/h3>\n<p>But going back to your question, I think what you\u2019re indirectly asking is how much should a trader who\u2019s starting out use? If he has, let\u2019s say, a $10,000 account; should he trade one contract or two contracts?\u00a0 I think anyone with less than a $25,000 account should be thinking himself as a one-contract trader, but allow for the possibility that he sometimes can add on.\u00a0 You can say, \u201cWell Al, that\u2019s not margining very much.\u201d\u00a0 It\u2019s not.\u00a0 I understand that, but I\u2019ve been doing this for a long time and I know the mathematics on it. And I know that even if you win nine trades in a row, 15 trades in a row, eventually you\u2019re going to have a run where you lose six, or seven, or eight times in a row.\u00a0 And if you\u2019re margining 25 percent of your account and you lose six in a row, you blew up your account.\u00a0 So I think it\u2019s always better to trade as small as possible, and then rare occasions if something looks really good, you can increase.\u00a0 But in general, I think it\u2019s much better to trade small as possible.<\/p>\n<h3>Trade the \u00abI don&#8217;t care\u00bb size<\/h3>\n<p><a href=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-65-es-chart-shorted-above-b35.jpg\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-65-es-chart-shorted-above-b35-300x199.jpg\" alt=\"Ask Al Brooks ES Chart Shorted Above B35\" width=\"300\" height=\"199\" class=\"alignleft size-medium wp-image-54964\" title=\"\" srcset=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-65-es-chart-shorted-above-b35-300x199.jpg 300w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-65-es-chart-shorted-above-b35-768x509.jpg 768w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-65-es-chart-shorted-above-b35-600x398.jpg 600w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-65-es-chart-shorted-above-b35.jpg 891w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a>Also, I sometimes talk about the \u201cI don\u2019t care\u201d size of trading, and I come back to that repeatedly because I think it\u2019s so important to being successful. You really cannot care.\u00a0 When I put a position on, I don\u2019t care.\u00a0 I don\u2019t care, right?\u00a0 And that\u2019s the way it has to be.\u00a0 If you want to be objective and you want to be able to do what\u2019s right, so when I shorted up here [B35], I didn\u2019t care if I lost, right?\u00a0 I knew the odds were really high that I was going to win.\u00a0 But to be able to take that trade, when the market looks like this, and you\u2019re shorting, right, you have to have confidence in the math.\u00a0 And I did.\u00a0 And with that, I just felt the odds were really good that if I sold and I sold higher, I was going to make money.\u00a0 And if lost money, I wouldn\u2019t care because when I say the odds are that I\u2019m going to make money, that does not mean I\u2019m guaranteed to make money.\u00a0 What that means is sometimes I\u2019m going to lose.\u00a0<\/p>\n<h3>Manage your trade<\/h3>\n<p><a href=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-65-es-chart-buying-scaling-in.jpg\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-65-es-chart-buying-scaling-in-300x198.jpg\" alt=\"Ask Al Brooks ES Chart Buying Low Scaling In\" width=\"300\" height=\"198\" class=\"alignleft size-medium wp-image-54965\" title=\"\" srcset=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-65-es-chart-buying-scaling-in-300x198.jpg 300w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-65-es-chart-buying-scaling-in-768x508.jpg 768w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-65-es-chart-buying-scaling-in-600x397.jpg 600w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-65-es-chart-buying-scaling-in.jpg 894w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a>However, if I\u2019m able to use a wide enough stop and manage the trade correctly, those times are going to be really, really rare.\u00a0 Even when the market does crazy things, if it\u2019s stair-stepping down. Even in a market like this where we get big, big moves down &#8212; you know, and let\u2019s say you\u2019re buying this low [B46\/56], if you have the ability to buy lower [B66] &#8212; the next reversal up &#8212; and you can manage your trade correctly, you\u2019re still going to make money.\u00a0 You\u2019re still going back to that low.\u00a0 And that\u2019s true on all these crazy, big days.\u00a0 Even a day like this. So even if you made the mistake of buying this low and did not get out, right, if you manage your trade correctly, buy more here. Part of the reason why we have these tails here is you have the 50 percent pullback traders, the traders who bought, scaled in, and the \u201cthank you God\u201d traders &#8212; \u201cOh gosh, you let me get back at breakeven on my trade.\u201d\u00a0 But the odds are high that if you pick your trades correctly &#8212; even if you\u2019re buying a falling market, as long as there\u2019s enough two-sided trading going on, the odds are high that if you manage it correctly, you\u2019ll be okay.<\/p>\n<p><em>Al Brooks<\/em><\/p>\n<p><a title=\"Al Brooks&#039; trading room\" href=\"https:\/\/www.brookstradingcourse.com\/online-day-trading-room\/\">Information on Al&#8217;s Online day trading room<\/a><\/p>\n<hr \/>\n","protected":false},"excerpt":{"rendered":"<p>Trading leverage or margin needed BPA trading room Q&amp;A: May 7, 2015 How much trading leverage do you use? For example, say the minimum initial margin on the Emini is $2,500 per contract, how much capital would you actually commit to trading this one contract? Video duration: 5min 5sec You can also view this video [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[159],"tags":[],"class_list":{"0":"post-54945","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-ask-al","7":"entry","8":"has-post-thumbnail","9":"override"},"featured_image_src":null,"author_info":{"display_name":"BTC Admin","author_link":"https:\/\/www.brookstradingcourse.com\/es\/author\/richardhk\/"},"_links":{"self":[{"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/posts\/54945","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/comments?post=54945"}],"version-history":[{"count":0,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/posts\/54945\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/media?parent=54945"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/categories?post=54945"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/tags?post=54945"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}