Forex Trading: Account capitalization, Leverage and Risk
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Throughout the Forex worldwide, brokers offer many different leverage setups and account types and there are many factors to consider when opening a trading account. Factors such as the style of trading that you will be using, your appetite for risk and the amount of investment capital that you have available, are all things to consider when opening a Forex trading account. So I want to take a moment to give you some food for thought when it comes to your trading account.
First, proper account capitalization can be defined as having a sufficiently funded trading account to place and hold trades and manage risk. For example, if you only have a small amount of risk capital available you should consider opening an account that gives you better flexibility with your lot allocation for each trade, like a mini or micro account.
Also, by having a properly funded trading account it increases your chances of recovery after a period of drawdown. With an insufficiently funded account, it will become much more difficult to recover losses when they happen. Of course, it is unrealistic to believe that you will never have a loss; the key is how you manage those losses.
In addition to proper account capitalization you should