Explain What is XAUUSD Leverage? Explain What is Gold Margin?

The definition of XAUUSD Leverage is having the ability to control a large amount of money using very little of your own money and borrowing the rest - this is what makes the xauusd market to attract many investors.

We shall explain xauusd leverage first & then explain xauusd margin in this learn how to calculate xauusd leverage and margin tutorial.

Example:

We shall us this example to explain what xauusd leverage is? If your xauusd broker gives you xauusd leverage of 100:1 (this is the best option to choose as the maximum xauusd leverage for any xauusd account)

This means you borrow 100 dollars for every dollar you have in your gold trading account.

To put in another way your xauusd broker gives you 100 dollars for every 1 dollar in your trading account. This is what's referred to as gold trading leverage.

This means if you open an account with $1,000 & your xauusd trading leverage ratio is 100:1, then you get $100 for every $1 you that you have in your trading account, total amount that you'll control is:

If for 1 dollar the broker gives you 100

Then if you have 1,000 you will get a total of:

$1,000 * 100 = 100,000 dollars

Now you control 100,000 dollars of Investment

Most new xauusd traders ask what xauusd leverage is best xauusd leverage for 1,000 dollars, or 2,000 dollars, or 5,000 dollars xauusd account? - The best xauusd leverage option to select when opening a live gold account is always 100:1 & not 400:1.

What's Gold Margin?

Gold Margin is the amount of money required by your xauusd broker so as to allow you to continue trading with borrowed amount.

In other words the question what's margin in XAUUSD? can be explained as the money required to cover open gold trades and is expressed in percentage. For 100:1, the amount you'll control is 100,000 dollars as explained in the above example.

Now can you compare a investor investing $1,000 with another one that is investing $100,000? Obviously Not. This is how it works: it takes you from that retail investor investing $1,000 to that investing $100,000. Where does this extra cash come from? - You borrow it from your xauusd broker in what is simply referred to as XAUUSD Leverage. This money which you borrow, you borrow it against the $1,000 dollar of your own money that you deposit with your xauusd broker. If you were to explain what this xauusd leverage means - then it is the ability to control a big amount of money using very little of your own money and borrowing the rest. Otherwise, if you were trade XAUUSD without this xauusd leverage it would not be as profitable as it is, in fact you can still choose not to use xauusd leverage, using the 1:1 leverage option but you would not make money & it would take too long to make any profit.

Example of how to calculate xauusd leverage and margin:

XAUUSD Margin required in this case is 1,000 dollars (your money) if it's expressed as a percentage of 100,000 dollars in your xauusd account which you control it is:

If xauusd leverage = 100:1

1,000 / 100,000 * 100= 1%

Margin required = 1%

(1/100 *100= 1%)

'Trade Forex Trading - Please simplify because I am Beginner'

(Simplify - your capital is $1,000 after xauusd leverage you control $100,000 - $1,000 is what percent of $100,000 - it is 1%) that is your margin requirement for your gold trading account.

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

MetaTrader 4 Transactions Window Panel - Gold Leverage & Margin Explained

• If = 50:1 XAUUSD Leverage

Then margin requirement = 1/50 *100= 2%

If you have $1,000,

1,000* 50 = $50,000.

1,000 / 50,000 * 100= 2%

(Simplify - your capital is $1,000 after xauusd leverage you control $50,000 - $1,000 is what percent of $50,000 - it is 2 %) that's your xauusd margin requirement

• If = 20:1 XAUUSD Leverage

Then the requirement = 1/20 *100= 5 %

If you have $1,000,

1,000* 20 = $20,000.

1,000 / 20,000 * 100= 5%

(Simplify - your trading capital is $1,000 after xauusd leverage you control $20,000 - $1,000 is what percentage of $20,000 - it is 5%) that is your xauusd margin requirement

• If = 10:1 Gold Leverage

Then the requirement is = 1/10 *100= 10 %

If you have $1,000,

1,000* 10 = $10,000.

1,000 / 10,000 * 100= 10%

(Simplify - your trading capital is $1,000 after xauusd leverage you control $10,000 - $1,000 is what percent of $10,000 - it's 10%) that is your xauusd margin requirement

What is Difference Between Maximum XAUUSD Leverage & Used Gold Leverage?

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

If your xauusd broker has given you 100:1 Maximum XAUUSD Leverage, but you only open a trade of 10,000 dollars then Used XAUUSD Leverage is:

10,000 dollars: 1,000 dollars (your money)

10:1

Your have used 10:1 XAUUSD Leverage, but your maximum is still 100:1 XAUUSD Leverage. This means that even if you're given 100:1 Maximum XAUUSD Leverage or 400:1 Maximum XAUUSD Leverage, you do not have to use all of it. It is best to keep your used xauusd leverage to a maximum of 10:1 but you'll still select 100:1 maximum xauusd leverage option for your trading account. The extra xauusd leverage will give you what we call Free XAUUSD Margin, As long as you have some Free margin on your xauusd account then your trades will not get closed by your gold trading broker because this margin requirement will remain above required level.

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

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

16.64 : 1 Used XAUUSD Leverage

XAUUSD Margin accounts allows traders to control a large amount of xauusd units using little of their own while borrowing the rest

Obtaining this xauusd account will enable you to borrow money from the broker to trade gold trading lots with.

The amount of borrowing power your trading account gives you what is called ' xauusd leverage", & is usually expressed as a ratio - a ratio of 100:1 leverage means you can control resources worth 100 times your deposit amount.

What this means in XAUUSD terms is that with 1 % margin in your gold account you can control a trade worth $100,000 with a $1,000 deposit.

However, Trading this xauusd account increases both potential for profits as well as losses. In XAUUSD you can never lose more than you invest, losses are limited to your deposits & usually brokers will close a trade which extends beyond your deposit amount by executing a margin call. XAUUSD traders must therefore try to keep their margin requirement level above that required. By using xauusd money management rules & keeping your used xauusd leverage below 5:1.