Trade Forex Trading

What is the Difference Between the Maximum Leverage & Used Leverage?

You should not that there is a difference between maximum leverage ( xauusd leverage given by your broker which is the highest leverage you can trade with if you choose to) and used leverage ( xauusd leverage depending on the lots you've opened/open trades). One is the online broker's (Max) and the other is trader's (Used). To explain this particular concept we shall use above example:

Your broker offers 100:1 max leverage. If you trade $100,000 lots, your used leverage is 100:1.

100,000 compared to 10,000 (your capital).

10:1 Used Leverage

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

In gold trading one of your xauusd rules: equity management rules on your xauusd gold plan should be to use leverage ratio below 5:1.

Leverage Example

The example illustrated below, the set leverage is 100 : 1, the margin which's 1 percentage is $2683.07, therefore the total amount controlled by the trader is: $268,307 - this is because with this leverage option the trader has used little of their own money & borrowed the rest of the money, with this set at 100:1 option, the trader is using 1 % of their trading capital, this 1 percent equals to $2683.07 dollars, if 1 percent is equal to $2683.07 then 100% is equal to $268,307

Used Leverage

MetaTrader 4 Platform - What sets maximum leverage apart from used leverage in trading?

In the above example, a trader utilizes $2,683.07 while controlling $268,307. Meanwhile, their account equity stands at $16,116.55. As such, the leverage applied is calculated as $268,307 divided by $16,116.55, resulting in 16.64:1.

16.64 : 1

In the trading account shown, even though the highest trade leverage is set at 100:1, the leverage being used is 16.64 : 1.

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