Leverage Calculator Commodity Trading
Types of Leverage in Commodity Trading
The meaning of commodity leverage is having the ability to control a large amount of money using very little of your own money & borrowing the rest - this is what makes the commodity market to attract many investors - Commodity Trading Leverage Synonym - Commodities Trading Gearing.
What does commodity leverage ratio of 1:100 mean?
When Trading Commodity using leverage it means that as a trader you can open trades that are larger than if you were using only the amount of money in your trading account without commodity trading leverage.
With commodity leverage you can use your money that is in your commodities trading account to borrow from your online commodity broker through what is referred to as commodity leverage. For examples if you have a commodity trading account with $100 dollars - you can use your $100 & borrow using the commodity leverage of 1:100, which means that you will borrow $100 from your commodity broker for every $1 in your commodities trading account & after leverage you will have $100*(1:100 Commodities Trading Leverage Ratio) = $10,000.
Commodity Trading leverage is written in the forms of a ratio:
For example leverage ratio of 1:100 or 1:50 or 1:10
Sometimes the leverage ratio can also be written as 100:1 or 50:1 or 10:1 depending on the broker you are trading with.
This leverage ratio just explains the amount of commodity leverage whether it is written 100:1 or 1:100.
Commodities Trading leverage ratio of 1:100 means you have borrowed using 1:100 and increased your commodity trading capital 100 times.
Leverage of 1:50 means you have borrowed using 1:50 & increased your trading capital 50 times.
Leverage of 1:10 means you have borrowed using 1:10 & increased your commodity trading capital 10 times.
Commodities Leverage Example:
We shall us this commodities examples to explain what commodity trading leverage is? If your commodity broker gives you leverage of 100:1 (this is best option to select as the maximum commodity leverage for any commodity trading account)
This means you borrow 100 dollars for every dollar you have in your commodities trading account.
To put in another way your commodity broker gives you 100 dollars for every 1 dollar in your commodities account. This is what is referred to as commodity trading leverage.
This means if you open a commodity trading account with $2,000 and your leverage is 100:1, then you get $100 for every $1 you that you have in your commodity account, the total amount of capital you'll control is:
If for 1 dollar the broker will give you 100
Then if you have 2,000 you'll get a total of:
$2,000 * 100 = 200,000 dollars
Now you control 200,000 dollars of capital in your commodities trading account that you can open commodities trades with
Most new commodity traders ask what commodity leverage ratio is best for 1000 dollars, or 5000 dollars, or 10,000 dollars commodity account? - The best option to select when opening a live Commodity Trading account is always 100:1 and not 500:1.
About Commodity Trading Leverage
The more commodity trading leverage that you use the greater the profits or losses
The less commodity leverage you use the lesser the profit or loss
It is therefore better to use less commodity leverage so as to minimize risks involved. The higher the commodity leverage used the higher the risk. This is one of the commodity leverage rules and commodity money management rules not to trade with more than 5:1 commodity trading leverage.
In Commodity Trading leverage money management rules: It is always advisable to use commodity leverage ratio below 10:1 which is still high, most professional money managers use commodity leverage ratio of 2:1 meaning they trade only 2% of their commodity trading account.
To Learn about Commodities Leverage and Margin:
Commodity Trading Leverage Formula and Margin Formula
