What is The Difference Between Maximum Oil Trading Leverage & Used Oil Trading Leverage?
You should note that there's a difference between maximum crude trading leverage ( oil leverage given by your broker which is the highest oil leverage you can trade with if you select to) and used crude trading leverage ( oil leverage depending on the lots you've opened/open trades). One is broker's (Maximum) and other is trader's (Used). To explain this concept we shall use oil example above:
If your oil broker has given you 100:1 Maximum oil leverage, but you only open trading lots of 100,000 dollars then Used oil leverage is:
100,000 dollars : 10,000 dollars (your money)
10:1 Used Oil Trading Leverage
You have used 10:1 oil leverage, but your maximum oil leverage is still 100:1. This means that even if you're given 100:1 Maximum crude oil leverage or 200:1 Maximum oil leverage , you do not have to use all of it. It is best to keep your used oil leverage to a maximum of 10:1 but you will still choose 100:1 maximum leverage option for your trading account. The extra oil leverage will give you what we call Free Oil Margin, As long as you've some Free margin on your trading account then your crude oil trades will not get closed by your oil broker because this margin requirement will remain above the required level.
When it comes to oil trading one of your rules: crude oil money management rules on your oil plan should be to use below 5:1.
Oil Trading Leverage Example
The example shown below, the set oil trading leverage ratio is 100:1, margin which is 1% is $2683.07, therefore the total amount controlled by oil 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 equivalent to $2683.07, if 1% is equivalent to $2683.07 then 100% is $268,307
MetaTrader 4 Oil Platform - What is The Difference Between Maximum Oil Trading Leverage & Used Oil Trading 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 oil leverage is ($268,307 divide by 16,116.55) = 16.64 : 1
16.64 : 1
In the oil trading account above even though maximum oil leverage set oil leverage is 100:1, Used oil leverage is 16.64 : 1
