Metals Leverage Example and Margin Trading Examples and Example

Margin required : It is the amount of money your metals broker requires from you to open a position. It is expressed in percentages.

Equity : It is the total amount of capital you have in your trading account.

Used margin : amount of money in your account which has already been used up when buying a metals trading contract, this contract is the one that's displayed in open trade positions. As a trader you can not use this amount of money after opening a trade transaction because you have already used it and it is not available to you.

In other words, because your metals broker has opened up a position for you using the capital you have borrowed, you must maintain this usable margin for your account as a security to allow you to continue using this metals Leverage Example he has given you.

Free margin : amount in your account that you can use to open new trade positions. This is the amount of money in your trading account that has not yet been metals Leverage Examples because you've not yet opened a trade with this money - this is also very important for you as a investor because it enables you to continue holding your open transactions as it will be explained below.

However, if you over use metals Trading Leverage Example, this free margin will drop below a certain percent at which your metal broker will have to close all your positions automatically, leaving you with a big loss. The metal broker at this point closes all your open trade position because if your open positions are left open they would lose the money that you've borrowed from them.

This is why you should always make sure you have a lot of free margin. To do this never trade more than 5 percent of your metal account, in fact 2 percent is recommended.

Difference Between Metal Leverage Example Set by the Broker and Used Metal Trading Leverage Example

If the set metals Trading Leverage Example is 100: 1, it means that you can borrow up to 100 dollars for every dollar which you have in your metals trading account but you do not have to borrow all the 100 dollars for every dollar you have, but you can decide to borrow 50:1 or 20:1. In this case even though the leverage option set 100:1 your used metals Leverage Example will be the 50:1 or 20:1 that you have borrowed to make a trade.

Example:

You have 1000 dollars (Equity)

Set 100:1

Metals Leverage Example Used = Amount used /Equity

If you buy metal lots equal to 100,000 dollars you'll have used

= 100,000/1000

= 100:1

If you buy metals trading lots equal to 50,000 dollars you'll have used

= 50,000/1000

= 50:1

If you buy metals trading lots equal to 20,000 dollars you'll have used

= 20,000/1000

= 20:1

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

The used is 100:1, 50:1, 20:1 depending on the size of metals lots traded.

So Why not Just Choose 10:1 option as the Maximum Metals Leverage Examples? Because to keep within the proper risk management rules it is even recommended that traders use less than this?

This question might seem straight forward but it's not, because when you trade you use borrowed money known A.K.A. Metals Trading Leverage Example. When you borrow capital from anyone or a bank you must maintain a security or collateral to acquire a loan, even if the security is based on monthly deduction from your salary, same thing with Metals Trading.

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

This is calculated in real time as you trade. To keep your borrowed money you must maintain what is known as the required capital (your deposit).

Now if Your Metals Leverage Examples is 100:1

When trading if you have $1,000 and use option 100:1 and buy 1 standard lot for $100,000 your margin on this transaction is $1000 dollars in your account, this is money that you'll lose if your open trade goes against you the other $99,000 that is borrowed, they will close the open metals trade transactions automatically once your $1,000 has been taken by the metals market.

But this is if your metals broker has set 0% Metals Margin Requirement before closing your metal trades automatically.

For 20% requirement before closing your metal trades automatically, then your trades will be closed once your balance gets to $200

For 50% requirement of this level before closing your metal trades automatically, then your trades will be closed once your balance gets to $500

If they set 100% requirement of this level before closing out your open trades automatically, then your trade will be closed once your balance gets to $1,000: Meaning the trade will close-out as soon as you execute it because even if as a trader you pay 1 pip spread your account trading balance will get to $990 and needed percent is 100% i.e. 1,000 dollars, therefore your orders will immediately get closed.

Most brokers don't set 100% requirement, but there are those who set 100% aren't suitable for you at all, choose those set 50% or 20% margin requirements, in fact, those brokers who set it at 20% are some of the best because the likely hood they closeout your trade is reduced as shown in examples above.

To know about this level which is calculated by your trading platform automatically - The MT4 Metals Platform will display this as "Metals Margin Requirement", This will be displayed as a percent the higher the percentage the less likely your trades are to get closed.

For Example if

Using 100:1

If metals Trading Leverage Example is 100:1 and you transact metals lots equal to $10,000

$10,000 dollars divide by 100:1, used capital is $100

Calculation:

= Capital Used * Percent(100)

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

Metals Trading Margin Requirement = 1,000 %

Investor has 980% above the required amount

Using 10:1

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

$10,000 dollars divide by 10:1, used capital is $1000

Calculation:

= Capital Used * Percent(100)

= $1,000/$1000 * Percent(100)

Metals Margin Requirement = 100 %

Investor has 80% above the required amount

Because when a trader has a higher metals Trading Leverage Example means that they have more percentage above what is required(A.K.A. More "Free Metals Trading Margin") their open metals trading transactions are less likely to get closed. This is reason why traders will choose the option 100:1 for their account but according to their risk management rules, these traders won't trade above 5:1.

These Areas are Shown on The Software Screen-Shot Below as an Example:

MetaTrader 4 Metals Platform