Do You Have to Use Leverage in XAU USD?

The meaning & definition of Leverage can be defined as having ability of controlling a big amount of money while using little of your money & borrowing the rest - this is what makes the market to attract many traders.

We shall explain leverage first and then explain gold margin in this learning how to calculate xauusd leverage & margin gold tutorial.

Gold Example:

We shall us this illustrations to explain what trading leverage is? If your online broker provides you leverage option of 100:1 (this is the best option to choose & select as the maximum leverage for any account)

This means you borrow $100 for each $1 you have on your xauusd account.

In other terms your online broker provides you $100 for each one dollar on your trading account. This is what is referred to as leverage.

This means if you open a account with $1,000 & your leverage option is 100:1, then you get $100 for every $1 which you have on your trading account, the total amount which you will control is:

If for $1 the broker provides you 100

Then if you have 1,000 in your account you will get a total of:

$1,000 * 100 = $100,000

Now you control $100,000 of Capital after applying leverage

Most new traders ask what leverage is best for 2,000 dollars, or $5,000 dollars, or $10,000 trading account? - Best leverage ratio to choose when opening a live account is 100:1 & not 500:1.

What's XAUUSD Gold Margin?

XAU USD Margin is the amount of money required by your broker so as to allow you to continue gold trading with the borrowed amount - leveraged amount.

In other terms the question what's margin in Gold Trading? can be presented as the money required by your online broker to cover open positions & is denoted as a percentage. For 100:1 leverage, the amount you'll control is $100,000 as expounded in the above illustration.

Now can you compare an investor investing $1,000 with another investor investing $100,000? Obviously You Can't. This is how leverage works in gold trading, it takes & moves you from the guy investing with $1,000 to the one investing $100,000. Where does the extra money originate and come from? You borrow from your broker in what is simply known as XAUUSD Leverage. This money that you borrow from your broker, you as a trader borrow it against the $1,000 of your own funds that you deposit with your broker in your account. If you were to define what this leverage means - then leverage is the ability to control a big amount of money using very little of your own money and borrowing the rest. Otherwise, if you were trade gold without this leverage it wouldn't be as profitable as it is, in fact you as a trader can still choose not to use this leverage, using the 1:1 leverage ratio but you would not make money it would take too long to make any gold profit.

Example of how to calculate xauusd leverage and margin:

Gold Margin required in this case is $1,000 (your capital) if it is denoted as a % of $100,000 dollars in your account which you control it is:

If leverage option = 100:1

1,000 / 100,000 * 100= 1%

XAU/USD Margin required = 1 %

(1/100 *100= 1%)

"Trade FX - Simplify a bit please because I am a Beginner"

(Simplify - your gold capital is $1,000 - after leverage you control $100,000 - $1,000 is what percent of $100,000? - it is 1%) that is your xau/usd margin requirement for your trading account.

The gold margin example shown and described below, the set leverage option is 100:1, the gold margin which is 1 % is $2683.07, henceforth the total amount controlled by the Gold trader is: $268,307 - this is because with this leverage option a trader has used little of their own money & borrowed the rest of the amount, with this leverage option set at 100:1, the Gold trader is using 1 % of their capital, this 1 % equals to $2683.07, if 1 % is equal to $2683.07 dollars then 100% is equal to $268,307 dollars

MetaTrader 4 Transactions Panel - What is Gold Leverage for Gold Beginner Traders? - Do You Have to Use Leverage in Gold?

• If = 50:1 Leverage Ratio

Then xauusd margin requirement = 1/50 *100= 2 percentage

If you have $1,000,

1,000* 50 = $50,000.

1,000 / 50,000 * 100= 2 percentage

(Simplify - your gold equity is $1,000 after leverage you now control $50,000 - $1,000 is what % of $50,000 - it is 2 %) that's your xau/usd margin requirement

• If = 20:1 Leverage Ratio

Then the gold margin requirement = 1/20 *100= 5 %

If you've got $1,000 dollars,

1,000* 20 = $20,000.

1,000 / 20,000 * 100= 5 %

(Simplify - your gold equity is $1,000 after leverage you now control $20,000 - $1,000 is what percentage of $20,000 - it is 5 %) that's your trading margin requirement

• If = 10:1 Leverage Ratio

Then the xau/usd margin requirement is = 1/10 *100= 10%

If you have $1,000,

1,000* 10 = $10,000.

1,000 / 10,000 * 100= 10%

(Simplify - your funds is $1,000 after leverage option you now control $10,000 - $1,000 is what % of $10,000 - it's 10 %) that is your xau/usd margin requirement

What is Difference Between Maximum Leverage & Used Gold Leverage?

However, you should note that there's a difference between max leverage (trading leverage given by your xauusd broker which is the highest leverage ratio you as a trader can trade with if you choose to) and used leverage ( leverage depending on the gold lot size you have opened - open trade lots positions). One is the broker's (Maximum Gold Leverage Ratio) & the other is the trader's (Used Leverage Ratio). To illustrate this leverage concept we will use the example illustration displayed above:

If your online broker has given you 100:1 Max Gold Leverage Ratio, but you only open/execute a trade of $10,000 then Used Gold Leverage is:

$10,000: $1,000 (your capital)

10:1

You've used 10:1 Leverage Ratio, but your max leverage ratio is still 100:1 Leverage. This means that even if you are given 100:1 Maximum Leverage Ratio or 500:1 Maximum Gold Leverage Ratio, you don't have to use all of it. It is best to keep your used leverage option to a maximum of 10:1 leverage but you will still choose 100:1 maximum leverage ratio for your account. The extra leverage gives you what we call Free Gold Margin, As long as you have Free margin on your trading account then your positions will not get closed by your xauusd broker because this margin requirement will remain above the required level based on the free margin in your account.

When it comes to gold trading - one of your rules: money management rules on your trade plan should be to use leverage ratio of below 5:1.

In example illustration revealed above, the gold trader is using $2683.07 dollars, total controlled amount is $268,307 dollars, but equity is $16,116.55, henceforth used leverage is ($268,307 divided by 16,116.55) = 16.64 : 1

16.64 : 1 Used Gold Leverage Ratio

XAUUSD margin accounts allow traders to control a big amount of currency using little of their own money while borrowing the rest

Obtaining this gold margin account will enable you to borrow money from the online broker to trade xauusd lots with.

The amount of borrowing power your margin trading account gives you what is called "leverage", and is generally denoted as a ratio - a leverage option of 100:1 means you as a trader can control resources worth 100 times your deposit.

What it means in gold terms is that with 1% margin in your account you as a trader can control one standard gold lot or 1 contract worth $100,000 with a $1,000 deposit.

However, trading on this margin account increases both potential for gold profits and also gold losses. In gold trading you as a trader can never lose more than what you invest, losses are limited to your deposits and usually brokers will close a trade transaction that extends beyond your deposit amount by executing a xauusd margin call. Traders must therefore try to keep their gold margin level above that required by their broker. By using equity management principles & keeping your used leverage ratio below 5:1.

What is Gold Leverage for Gold Beginner Traders? - Do You Have to Use Leverage in Gold? - Leverage in Gold - Leverage Example - Leverage & Margin Explained - Leverage Calculator

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