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CFD sizing with higher leverage: Am I missing something?
Been dabbling in CFDs more recently, mostly on $DAX and a bit of $EURUSD. I get the whole 'leverage magnifies gains and losses' spiel, but what's really bugging me is how people manage position sizing on these instruments when leverage is cranked right up. I mean, theoretically, with 1:500 or even 1:200, a tiny move can wipe out a good chunk if you're not careful. I'm trying to keep my actual dollar risk per trade consistent with my futures strategy, but it feels like I'm constantly doing mental gymnastics to scale down my CFD units to match. Is there some rule of thumb I'm just not getting, or is everyone else just more comfortable with bigger swings?
2 comments · 1 points
You're spot on, it's a critical point. My personal take is that high leverage, while tempting, often leads to oversized positions relative to one's risk tolerance, making even small market fluctuations disproportionately impactful. It's more about managing the actual dollar risk per trade than the notional value facilitated by leverage.