Trade Forex Trading

Leverage Example and Margin Example and Examples

Margin required : It's the sum of money your broker requires from you to open a trade position. It's expressed in percentages.

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

Used margin : amount of money in your account that has already been used when buying a xauusd contract, this contract is the one that is displayed & shown on open positions. You can not use this amount of money after registering a trade because you have already used it and it is not available to you.

In other terms, because your broker has opened up a trade for you using the trading capital you've borrowed, you must keep this usable margin for your account as a security to allow you the trader to continue using this Leverage Examples he has given you.

Free margin : amount in your account which you as a trader can use to execute new trades. This is the sum of money in your trading account that has not 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 over use xauusd trading Leverage Example, this free margin will drop below a certain percentage at which your broker will have to liquidate all of your trade positions mechanically/automatically, leaving you with a large loss. Xauusd broker at this point liquidates all your position because if your trade positions were to be left open they would lose the money that you have borrowed from them.

This is why you should always make sure you have got a lot of free margin. To do this never trade more than 5 percentage of your account, in fact two percent is advised.

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

If the set gold trading Leverage Example is 100: 1, what it means is that you as a trader can borrow upto 100 dollars for every 1 dollar you have in your account, but you don't have to borrow all the $100 dollars for every one dollar which you have, you as a trader can select that you as a trader want to borrow 50:1 or 20:1. In this instance though leverage option is set at 100:1 your used Leverage Example will be the 50:1 or 20:1 which you have borrowed to make a trade.

Example:

You have $1000 dollars (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 as a trader can see that although the set is 100:1

The used leverage option is 100:1, 50:1, 20:1 based on the size of lots transacted.

So Why not Just Choose and Select 10:1 option as the Maximum Leverage Example? Because to keep within the suitable equity money management rules it is even advised that traders use less than this?

This question may seem straight forward but it's not, because when you trade you use borrowed money known as Leverage Example. When you borrow capital from anybody or a bank you as a trader must preserve a collateral or security to get a loan, even if the security is based on monthly deduction from your own salary, the same thing with XAU/USD.

In xauusd the security is referred to as margin. This is 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 you as a trader have $1,000 dollars and use leverage option 100:1 and buy one standard contract for $100,000 your margin on this trade is $1000 dollars in your account, this is money which you will lose out if your open trade moves against you - the other $99,000 dollars that is borrowed, they'll close the open trade positions mechanically/automatically once your $1,000 balance has been taken by the market.

But this is if your broker has set 0% Margin Requirement before closing out your trade positions automatically.

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 open 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, henceforth your open positions will immediately get liquidated.

Most brokers do not set 100% requirement, but there are those who set 100% aren't suitable 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's 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 dollars

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 lots equal to $10,000

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

Calculation:

= Capital Used * Percentage

= $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

More Guides:

Forex Market Traders Seminar Gala

Forex Market Traders Seminar

XAUUSD Broker