Trade Gold Trading

Leverage Examples & Margin Examples & Examples

Margin required : It's the sum of money your broker requires from you to open a trade. It is denoted in percentages.

Equity : It's total amount of capital you've got in your trading account.

Used margin : sum of money on your account that has been already used when buying a trading contract, this contract is the one that is displayed and shown in the open trades. As a trader you can not use this amount of money after registering and opening a trade transaction because you've already used it and it is not available to you.

In other terms, because your broker has opened up a trade for you using the trading capital you've borrowed, you must keep this usable trading margin for your account as a collateral to allow you to continue using this Leverage Examples he has given you.

Free margin : sum in your account which you can use to execute new trades. This is the sum of money on your account that hasn't yet been Leverage Exampled because you haven't yet opened a trade with this money - this amount is also very important for you as a trader because it enables you as a trader to continue holding your open trade positions as it will be explained below.

However, if you over use Trade Leverage Example, this free trading margin will go below a certain % at which your broker will have and be forced to close all of your trade positions mechanically/automatically, leaving you with a big loss. Broker at this point closes all your open trade positions because if your trade positions are left open they would lose the money you have borrowed from them.

This is why as a gold trader should always ensure that you have a lot of free margin. To do this never trade more than 5 percent of your account, in fact 2 percentage is advised.

Difference Between Leverage Examples Set by the Broker & Used Leverage Example

If the set Trading Leverage Example is 100: 1, what it means is that you can borrow upto 100 dollars for every one dollar you that have on your account, but you do not have to borrow all the 100 dollars for every one dollar you have, you can decide that you as the gold trader want to borrow 50:1 or 20:1. In this instance though leverage option is set at 100:1 your used Trading Leverage Examples will be the 50:1 or 20:1 that you as a trader have borrowed to make a trade.

Example:

You have $1000 (Equity)

Set 100:1

Leverage Examples Used = Amount used /Equity

If you buy lots equal to $100,000 dollars you will have used

= 100,000/1000

= 100:1

If you buy xauusd gold lots equal to 50,000 dollars you'll have used

= 50,000/1000

= 50:1

If you buy xauusd gold lots equal to $20,000 you will have used

= 20,000/1000

= 20:1

In these three cases you can see that although the set is 100:1

The used leverage is 100:1, 50:1, 20:1 depending on size of lots traded and transacted.

So Why not Just Select and Choose 10:1 ratio as the Max Leverage Examples? Because to keep within the proper risk management guidelines it's even recommended that investors use less than this?

This question may seem straight forward but it is not, because when you trade you as a trader use borrowed money known as Leverage Example. When you borrow capital from anybody or from a bank you must maintain a security or collateral to acquire a loan, even if the collateral is depending and based on monthly deductions from your own salary, the same thing with Trading.

In gold trading the security is referred to as margin. This is the capital that you deposit with your broker.

This is calculated in real-time as you trade. To keep your borrowed money you must keep what is known and referred to as required capital (your deposit).

Now if Your Leverage Example is 100:1

When trading, if you have $1,000 & use leverage ratio 100:1 and buy one standard lot for $100,000 then your margin on this trade is the $$1000 in your account, this is the money which you'll lose out if your open trade transaction moves against you, the other $99,000 dollars that's borrowed, they will liquidate the open trade positions mechanically once your $1,000 has been taken by trading market.

But this is if your broker has set 0 percent Margin Requirements before liquidating your trades mechanically.

For 20 percent requirement before closing out your trade mechanically/automatically, then your trade positions will be liquidated once your account balance gets to $200

For 50% requirement of this level before closing out your trade positions mechanically/automatically, then your trade transactions will be stopped out once your account balance gets to $500

If they set 100 percent requirement of this level before closing your open trade transactions mechanically/automatically, then your trade will be closed out once your account balance gets to $1,000: Explanation the trade will closeout as soon as you execute it because even if you pay 1 pip spread your account balance will drop to $990 & the needed % is 100 percent i.e. $1,000, therefore your open positions will immediately get liquidated.

Most brokers do not set 100 percent requirement, but there are those that set 100% aren't suitable for you at all, select those set 50 % or 20 % margin requirement, in fact, those brokers that set their trading margin requirement at 20 percent are among some of the best because the likely-hood that they close-out your trade position is minimized such as shown on the example above.

To know about this level which is calculated by your software automatically - the MetaTrader 4 Platform will display this as "XAU/USD Margin Requirements", This will be shown as a percentage higher the percent the less likely your trade positions are to get closed.

For Example if

Using 100:1

If gold Trading Leverage Example is 100:1 & you trade lots equal to $10,000

$10,000 divided by 100:1, your used equity is $100 dollars

Calculation:

= Capital Used * Percentage

= $1,000/$100 * Percent(100)

Gold Margin Requirements = 1000%

Investor has 980% above the required sum

Using 10:1

If gold Trading Leverage Example is 10:1 and you transact lots equal to $10,000

$10,000 divided by 10:1, your used equity is $1000 dollars

Calculation:

= Capital Used * Percentage

= $1,000/$1000 * Percentage

XAU/USD Margin Requirement = 100%

Investor has 80 % above the requirement amount

Because when a trader has a higher Trading Leverage Example means they have more percent above what is required (A.K.A. Known As More "Free Margin") their open gold trades are less likely to get closed. This is the explanation why traders will select option 100:1 for their account but according to their money management rules, they won't trade above 5:1 leverage ratio.

These Zones are Displayed on the Trading Software Platform Image Below as an Example:

How Trading Leverage Greatly Increases Profits and XAUUSD Losses

MT4 Gold Software

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