Oil Trading Leverage Definition
What is Oil Trading Leverage in Oil?
The definition of oil leverage is having the ability to control a big amount of money using very little of your own money and borrowing the rest - this is what makes the oil market to attract many investors.
What does a Crude Oil leverage of 1 100 mean?
When Trading Oil using oil leverage it means that as a trader you can open trade positions which are larger than if you were using only the amount of money in your oil account without crude trading leverage.
With oil leverage you can use your money that's in your oil account to borrow from your oil broker through what's referred to as oil leverage. For examples if you have a oil account with $100 dollars - you can use your $100 & borrow using the oil leverage of 1:100, which means that you'll borrow $100 from your oil broker for every $1 in your oil account and after oil leverage you will have $100*(1:100 Oil Trading Leverage) = $10,000.
crude oil leverage is written in form of a ratio:
For example oil leverage 1:100 or 1:50 or 1:10
Sometimes the oil leverage can also be written as 100:1 or 50:1 or 10:1 depending on your crude trading broker.
This ratio just explains the amount of oil leverage whether it is written 100:1 or 1:100.
Oil Trading Leverage of 1:100 means you have borrowed using 1:100 & increased your trading capital 100 times.
Oil Leverage of 1:50 means you've borrowed using 1:50 and increased your trading capital 50 times.
Oil Leverage of 1:10 means you've borrowed using 1:10 and increased your trading capital 10 times.
Example:
We shall us this oil example to explain what oil leverage is? If your oil broker gives you oil leverage of 100:1 (this is best option to select as the maximum oil leverage for any oil account)
This means you borrow 100 dollars for every dollar you've in your oil trading account.
To put in another way your oil broker gives you 100 dollars for every 1 dollar in your oil account. This is what is known as crude trading leverage.
This means if you open a oil account with $1,000 & your oil trading leverage is 100 : 1, then you'll get $100 for every $1 you that you have in your account, the total amount which you will control is:
If for 1 dollar the broker gives you 100
Then if you have 1,000 you'll get a total of:
$1,000 * 100 = 100,000 dollars
Now you control 100,000 dollars of capital in your oil account that you can open trades with
Most new oil traders ask what oil leverage is best for 100 dollars, or 500 dollars, or 1,000 dollars oil account? - The best option to choose when opening a live crude trading account is always 100:1 & not 400:1.
Trading Oil with Oil Trading Leverage
The more oil leverage you use the greater the profit or loss
The less oil leverage you use lesser the profit or loss
It is therefore better to use less oil leverage so as to minimize the risks involved. The higher the oil leverage used the higher the risk. This is one of the oil leverage rules not to trade with more than 5:1 crude trading leverage.
In oil leverage rules: It is always advisable to stay below 10:1 which is still high, most professional money managers use 2:1 in their oil trading account.
To Learn and Know More about Crude Oil Trading Leverage & Margin - How Do I Read the Topics Below:
Crude Oil Leverage & Crude Oil Margin Explained
