What's The Difference Between Maximum Commodity Leverage & Used Commodities Trading Leverage?

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

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

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

10:1 Used Commodity Trading Leverage

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

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

Commodity Trading Leverage Example

The example shown below, the set commodities leverage is 100:1, the margin which is 1% is $2683.07, therefore the total amount controlled by the 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% equals to $2683.07, if 1% equals to $2683.07 then 100% is $268,307

What is The Difference Between Maximum Commodities Leverage & Used Commodity Trading Leverage?

In the above image example, the trader is using $2683.07, the total controlled amount is $268,307, but account equity is 16,116.55, therefore used commodities leverage is ($268,307 divide by 16,116.55) = 16.64 : 1

16.64 : 1

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