What is The Difference Between Maximum CFDs Leverage and Used CFDs Leverage?
You should note that there is a difference between maximum cfds trading leverage ( cfd leverage given by your broker which is the highest cfd leverage you can trade with if you select to) and used cfds trading leverage ( cfd leverage depending on the lots you have opened/open trades). One is broker's (Maximum) and other is trader's (Used). To explain this concept we shall use cfd example above:
If your cfd broker has given you 100:1 Maximum cfd leverage, but you only open trading lots of 100,000 dollars then Used cfd leverage is:
100,000 dollars : 10,000 dollars (your money)
10:1 Used CFD Leverage
You have used 10:1 cfd leverage, but your maximum cfd leverage is still 100:1. This means that even if you are given 100:1 Maximum cfds leverage or 200:1 Maximum cfd leverage , you do not have to use all of it. It is best to keep your used cfd leverage to a maximum of 10:1 but you'll still choose 100:1 maximum leverage option for your trading account. The extra cfd leverage will give you what we call Free CFD Margin, As long as you have some Free margin on your trading account then your cfds trades will not get closed by your cfds broker because this margin requirement will remain above the required level.
When it comes to cfd trading one of your rules: cfds money management rules on your cfd plan should be to use below 5:1.
CFDs Leverage Example
The example shown below, the set cfd leverage is 100:1, the margin which is 1% is $2683.07, therefore the total amount controlled by the trader is: $268,307 - this is because with this leverage the trader has used little of his money & borrowed the rest, with this set at 100:1, the trader is using 1 % of their capital, this 1% is equal to $2683.07, if 1% is equivalent to $2683.07 then 100% is $268,307
MT4 CFD Platform - What is The Difference Between Maximum CFDs Leverage and Used CFD Leverage?
In the above image example, the trader is using $2683.07, total controlled amount is $268,307, but trading account equity is 16,116.55, therefore used cfd leverage is ($268,307 divide by 16,116.55) = 16.64 : 1
16.64 : 1
In the cfd trading account above even though maximum cfd leverage set cfds trading leverage is 100:1, Used cfd leverage is 16.64 : 1
