Why small accounts blow up fast: leverage, explained simply

Small account, big lot size. It feels great until it doesn't.

Here's the simple math behind most blown accounts.

Gold, 1 standard lot is 100 ounces. Price moves 1 dollar, that's 100 dollars.

Price moves 10 dollars, that's 1,000 dollars.

On a 1,000 dollar account, a 10 dollar move against 1 lot is the whole account.

And 10 dollars isn't much for gold. On this chart, a normal hourly candle moves about 10 to 15.

Then this one hour candle fell 55 dollars, from 4121 to 4066.

On 1 lot, that's about 5,500 dollars, in one hour.

Leverage lets a small deposit open a big position. It doesn't make the risk smaller.

The fix: size from your risk, not from your margin.

Risk 1 percent of 1,000 dollars. That's 10 dollars.

With a 10 dollar stop, that's 0.01 lots. Price moves 1 dollar, you lose 1 dollar.

Then a candle like that costs you about 10 dollars, not your whole account.

Save this. 1 lot of gold: 1 dollar is 100 dollars. Small account, small size. Always use a stop.

Your turn. What lot size do you use? 0.01, 0.1, or 1 lot or more? Comment below.

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