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Leverage Definition

Gold Leverage Calculator

The meaning of leverage is having the means to control a large amount of money using very little of your own money and borrowing the rest - this is what makes the market to attract a lot traders.

What does a leverage ratio of 1 100 mean?

When Trading using leverage it means that you as a trader can open position positions which are bigger than if you were using only the amount of money in your account without leverage.

With leverage you as a trader can use your money which's in your trading account to borrow from your broker through what's known as leverage. For illustration, if you have a account with $100 - you as a trader can use your $100 and borrow using the leverage option of 1:100, which means that you will borrow $100 dollars from your broker for every $1 in your account and after leverage you'll have $100*(1:100 Leverage) = $10,000.

leverage is represented in the format of a ratio:

For illustration leverage 1:100 or 1:50 or 1:10

Sometimes the leverage ratio also can be written as 100:1 or 50:1 or 10:1 depending on your broker.

This ratio just illustrates the amount of leverage whether it's written 100:1 or 1:100.

Leverage of 1:100 means you have borrowed using 1:100 & increased your trading capital 100 times.

Leverage of 1:50 means you have borrowed using 1:50 and increased your trading capital 50 times.

Leverage of 1:10 means you've borrowed using 1:10 & increased your trading capital 10 times.

Example:

We will use this illustration to indicate what leverage is? If your broker assigns you leverage ratio of 100:1 (this is the best option to choose as the max leverage for any account)

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

In other terms your broker gives and provides you $100 dollars for every one dollar on your account. This is what is known as leverage.

This means that if you open a account with $1,000 & your leverage option is 100:1, then you get $100 for every $1 you that you have in your account, total amount that you will control is:

If for 1 dollar the broker gives and provides you 100

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

$1,000 * 100 = $100,000

Now you control 100,000 of capital in your trading account which you as a gold trader can open trade positions with

Most beginner traders ask which leverage is best for $100 dollars, or $500 dollars, or $1,000 trading account? - Best option to choose when opening a real account is always 100:1 and not 400:1.

Trading with Leverage Ratio

The more leverage you as a gold trader use the greater the profit/loss

The less leverage you use the lesser the profits/losses

It's thence better to use less leverage so that to minimize risks involved. The greater the leverage option used the greater the risks. This is one of leverage guide-lines not to trade with more than 5:1 leverage option.

In leverage guide-lines: It is recommended to stay below 10:1 which is also still high, most professional experienced equity managers use 2:1 in their account.

To Learn and Know More about Leverage and Margin - Learn the Topics Listed Below:

XAU/USD Leverage & Margin Explained with Example

Get More Topics:

Forex Market Traders Seminar Gala

Forex Market Traders Seminar

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