What's 1:25 Leverage for $100 Mean?
Leverage in xauusd is the ratio of a trader's money to that of the borrowed capital which has been borrowed from the online broker.
For example 1:25 xauusd leverage means that for each one dollar a trader has in their account they have borrowed 25 from their broker. Hence if a trader has $100 in their account they will have borrowed using 1:25 xauusd leverage & hence after leverage of 1:25 they will have $100*1:25 xauusd leverage & this will be equal to $2500 dollars capital.
Leverage is the use of borrowed funds in xauusd so as to trade much bigger volumes in order to increase profit potential of trades.
1:25 xauusd leverage basically means that as a trader you get $25 for every $1 in your account.
1:25 Leverage for $100 Account
In XAUUSD, a small deposit can control a much larger trade position this is referred to as Leverage, which gives investors ability to earn more profits on opened trades, & at same time keep risk capital to a minimum.
A trader will transact on borrowed capital, having $100 trader can borrow the rest using a leverage option such as 1:25 - meaning that one borrows $25 dollars for every 1 dollar they have in their account, therefore in total they will control a total of $2500 dollars without having to deposit all of it - this is how leverage works in xauusd.
Leverage is expressed in the form of a ratio, for Example 1:25, means the broker with give a trader $25 Dollars for every 1 dollar which the trader has.
XAUUSD Margin is the amount of money required by your broker to allow you to continue trading with leveraged amount. XAUUSD Margin is the amount you deposit so as to open a trading account with. If you deposit $100 then that is your xauusd margin.
With leverage it is possible for retail traders to trade the market. Leverage of 1:25 means that for each 1 dollar which you deposit, the broker will give you 25 dollars. This also means that in converse the broker requires you to maintain a margin of $1 Dollar for every $25 Dollars that they give you so as to let you continue controlling the borrowed amount of capital that they have given you for trading.
Gold Margin Example:
If you deposit $100, and the broker gives you leverage of 1:25 then it means you now have $100*(1:25) = $2500 Dollars that you can trade with.
Gold Money Management Guidelines for Trading with 1:25 Leverage
When trading xauusd with 1:25 xauusd leverage you should develop your xauusd money management rules that you will use to manage your trading account capital. This set of gold money management rules should be written in your xauusd plan. If you're a starter trader wanting to open a $100 dollar account & you don't know what xauusd funds management principles are, you can use the learn gold tutorials below to learn about what's xauusd funds management?
How Do I come up with xauusd money management rules for trading a 1:25 Leverage Account.
Trading with Gold Leverage
The more leverage you use the greater the profit/loss
The less leverage that you use the lesser the profit or loss
It's hence better to use less leverage to minimize risks involved. The higher the leverage used the greater the risks. This is one of leverage rules not to trade with more than 5:1 leverage.
In leverage rules: It's always advisable to stay below 10:1 which is still high, most professional funds managers use 2:1 ratio in their trading account.
To Learn and Know More about Leverage and Margin - Read the Topics Below:
XAUUSD Leverage and Margin Discussed
