Trade Forex Trading

Leverage Example and Margin Example and Examples

Margin required: This refers to the amount of money your trading broker necessitates from you to open or execute a position, expressed as a percentage.

Equity : It's the total sum of capital you have in your account.

Used margin is cash from your account tied up in an XAUUSD deal. That contract shows in your open trades. You can't touch this money after you place the trade. It's already in use and out of reach.

In other words, when your broker uses borrowed money to open a trade for you, you need to keep some money in your account as a safety net, so you can keep using the leverage they gave you.

Free margin : amount in your account which you can use to execute new trades. This is the sum of money in your trading account that hasn't yet been xauusd gold trading Leverage Examples because you've not yet opened a trade using this money - this money is also very important for you as a investor because it facilitates you to continue holding your open trades as explained below.

However, if you use xauusd trading Leverage too much, for example, this free margin will fall below a certain point, and your online broker will have to close all of your trade positions automatically, causing you to have a big loss. The xauusd broker closes all your positions at this time because if your trade positions were left open, they would lose the money that you borrowed from them.

This underscores the importance of maintaining ample free margin. To achieve this, never commit more than 5% of your account capital: in fact, an allocation of 2% is the recommended ceiling.

Difference Between XAU/USD Leverage Example Set by the Broker and Used Leverage Example

If the gold trading Leverage Example is 100: 1, it means you can borrow as much as 100 dollars for every 1 dollar you have, but you don't need to borrow the full $100 for every dollar, you can choose to borrow 50:1 or 20:1. Even if the leverage is set to 100:1, the leverage you use will be the 50:1 or 20:1 that you borrowed to trade.

Example:

You have $1000 (Equity)

Set 100:1

Leverage Example Used = Amount used /Equity

If you buy xauusd trading lots equal to 100,000 dollars that you will have used

= 100,000/1000

= 100:1

If you buy lots equal to $50,000 dollars you'll have used

= 50,000/1000

= 50:1

If you buy lots equal to $20,000 dollars you'll have used

= 20,000/1000

= 20:1

In these three cases you can see that although the set is 100:1

The leverage ratios applied are 100 to 1, 50 to 1, and 20 to 1, depending on the volume of contracts or lots traded.

So Why not just pick and use the 10:1 choice as the highest amount of borrowing? Because to stick to the rules of using the correct amount of money it is even suggested that traders use less than this?

This might seem like a simple question, but it is not. When you trade, you are using borrowed money known as Leverage. When you borrow money from someone or a bank, you must put up something of value as collateral to get the loan. This is true even if the collateral is a monthly payment from your paycheck, just like with XAU/USD.

In XAU/USD, the security is referred to as margin. This represents the capital you deposit with your broker.

This is calculated in realtime as you trade. To keep your borrowed money you as a trader must maintain what is referred to as required capital (your deposit).

Now if Your Leverage Example is 100:1

When trading, if your account has $1,000 and you opt for a leverage of 100:1 to buy one standard contract worth $100,000, your margin for this trade will be $1,000. This is the amount that will be lost if your open trade goes against you. The remaining $99,000 is borrowed, and once your balance of $1,000 is exhausted by the market, your open positions will be automatically closed.

This condition, however, is only valid if your broker has stipulated a 0% Margin Requirement before automatically liquidating your open positions.

For 20% requirement before liquidating your trades automatically, then your positions will be stopped out once your account balance reaches $200

For 50 % requirement of this level before closing out your trade positions automatically, then your positions will be stopped out once your account balance gets to $500

If they set 100% requirement of this level before closing your execute positions automatically/mechanically, then your trade position will be liquidated once your balance gets to $1,000: Explanation the trade will closeout as soon as you execute it because even if you pay 1 pips spread your account balance will get to $990 & the needed % is 100 percentage i.e. $1,000, thence your open positions will immediately get liquidated.

Most brokers do not set 100% requirement, but there are those who set 100% aren't appropriate for you at all, select those set 50 percent or 20% margin requirements, in fact, those brokers that set their trading margin requirement at 20% are some of the best since due to the likely-hood they liquidate-out your trade is minimized just as is illustrated and shown on examples revealed above.

To know about this level which-is calculated by your platform automatically - the MetaTrader 4 Platform will show this as "Gold Margin Requirement", This will be portrayed as a percentage the higher the percentage the less likely your trade positions are to get closed.

For Example if

Using 100:1

If xauusd trading Leverage Example is 100:1 and you transact lots equal to $10,000

$10,000 divide by 100:1, used capital is $100

Calculation:

= Capital Used * Percent(100)

= $1,000/$100 * Percentage

Gold Margin Requirement = 1000%

Trader has 980% above the requirement amount

Using 10:1

If xauusd trading Leverage Example is 10:1 & you trade contracts/lots equal to $10,000

$10,000 divide by 10:1, used capital is $1000

Calculation:

= Capital Used * Percent

= $1,000/$1000 * Percent(100)

Gold Margin Requirement = 100%

Trader has 80% above the required sum

Because when one has got a higher xauusd gold trading Leverage Example means that they have more percentage above what is required(A.K.A. More "Free Margin") their open xauusd transactions are less likely to get closed. This is the reason why investors will select option 100:1 for their trading account but in accordance to their risk management guidelines, these investors won't trade above 5:1.

These Zones are Shown on the Platform Software Image Below as an Example:

How Leverage Greatly Increases Profits and Gold Losses - Which is the Best Leverage?

MetaTrader 4 Software

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XAUUSD Broker