What is The Difference Between Maximum Stocks Leverage & Used Stock Trading Leverage?

You should note that there is a difference between maximum stock trading leverage ( stock trading leverage given by your broker which is the highest stock leverage you can trade with if you select to) & used stock trading leverage ( stock leverage depending on the lots you've opened/open trades). One is broker's (Maximum) and the other is trader's (Used). To explain this concept we shall use stocks trading example above:

If your stock broker has given you 100:1 Maximum stocks trading leverage, but you only open trading lots of 100,000 dollars then Used stock trading leverage is:

100,000 dollars : 10,000 dollars (your money)

10:1 Used Stock Trading Leverage

You have used 10:1 stocks leverage, but your maximum stock leverage is still 100:1. This means that even if you're given 100:1 Maximum stock leverage or 200:1 Maximum stock trading leverage , you don't have to use all of it. It is best to keep your used stock trading leverage to a maximum of 10:1 but you will still choose 100:1 maximum leverage option for your stock trading account. The extra stock leverage will give you what we call Free Stock Trading Margin, As long as you have some Free margin on your trading account then your stocks trades will not get closed by your stock broker because this margin requirement will remain above the required level.

When it comes to trading stock one of your stock trading rules: stock money management guidelines on your stock trading plan should be to use below 5:1.

Stocks Trading Leverage Example

The examples illustrated & described below, the set stocks leverage ratio is 100:1, margin which is 1% is $2683.07, therefore the total amount controlled by stock trader is: $268,307 - this is because with this leverage the trader has used little of his money and borrowed the rest, with this set at 100:1, the trader is using 1% of their capital, this 1% equals to $2683.07, if 1% equals to $2683.07 then 100% is $268,307

MetaTrader 4 Stocks Trading Platform

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 stocks leverage is ( $268,307 divide by 16,116.55 ) = 16.64 : 1

16.64 : 1

In the stock account above even though the maximum stock trading leverage set stock trade leverage is 100:1, Used stock leverage is 16.64 : 1