What's The Best Commodity Trading Leverage to Use in Commodity Trading?
Best Commodity Trading Leverage for Mini Commodity Trading Account
The definition 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 commodities market to attract many investors.
What does a Commodities leverage of 1 100 mean?
When Commodity Trading using 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 commodity trading account without commodities trading leverage.
With commodity leverage you can use your money that is in your commodities trading account to borrow from your commodity broker through what is referred to as commodities leverage. For example 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 commodity leverage you will have $100*(1:100 Commodity Trading Leverage) = $10,000.
commodity trading leverage is written in the forms of a ratio:
For example commodity trading leverage 1:100 or 1:50 or 1:10
Sometimes the commodity leverage can also be written as 100:1 or 50:1 or 10:1 depending on your commodities trading broker.
This ratio just explains the amount of commodity leverage whether it is written 100:1 or 1:100.
Commodity Trading Leverage of 1:100 means you have borrowed using 1:100 & increased your trading capital 100 times.
Commodity Trading Leverage of 1:50 means you have borrowed using 1:50 and increased your trading capital 50 times.
Commodity Trading Leverage of 1:10 means you have borrowed using 1:10 & increased your trading capital 10 times.
Example:
We shall us this commodities examples to explain what commodity trading leverage is? If your commodity broker gives you commodity 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 commodities trading leverage.
This means if you open a commodity trading account with $1,000 & your commodities leverage is 100:1, then you get $100 for every $1 you that you have in your commodity account, the total amount which you will control is:
If for 1 dollar the broker will give 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 commodities account that you can open trades with
Most new commodity traders ask what commodity leverage is best for 100 dollars, or 500 dollars, or 1,000 dollars commodity account? - The best option to select when opening a live commodities account is always 100:1 and not 400:1.
Commodities Trading with 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 trading leverage so that to minimize the risks involved. The higher the commodity leverage used the higher the risk. This is one of the commodity trading leverage rules not to trade with more than 5:1 commodities trading leverage.
In commodity trading leverage rules: It is always advisable to stay below 10:1 which is still high, most professional money managers use 2:1 in their commodity trading account.
To Learn More about Commodity Leverage & Margin - How Do You Read the Topics Below:
What's The Best Commodity Trading Leverage for $100?
