What's 1:400 Leverage for $100 Dollars Mean?
Leverage in xauusd is the ratio of a gold trader's money to that of the borrowed capital which has been borrowed from the online broker.
For example 1:400 leverage means that for every one dollar one has in their account they have borrowed 400 from their broker. Hence if one has $100 in their account they will have borrowed using 1:400 leverage & therefore after using leverage of 1:400 they'll have $100*1:400 leverage and this will be equal to $40000 dollars capital.
Leverage is the use of borrowed funds in xauusd to trade much larger volumes so as to maximize profit potential of trades.
1:400 leverage basically means that as a trader you get $400 for every $1 in your account.
1:400 Leverage for $100 Dollars Trading Account
In XAUUSD, a small deposit can control a much larger trade position this is referred to as Leverage, which gives traders ability to earn more profits on opened trade positions, & 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 1:400 - meaning that one borrows $400 for every 1 dollar they have in their trading account, therefore in total they will control a total of $40000 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 1:400, means the broker with give a trader $400 Dollars for every dollar that the trader has.
Gold Margin is the sum of money required by your online broker to allow you to continue trading with leveraged amount. XAUUSD Margin is the amount you deposit so that to open a account with. If you deposit $100 then that is your xauusd margin.
With leverage it's possible for retail traders to trade the market. Leverage of 1:400 means that for each $1 dollar that you deposit, the broker will give you $400 dollars. This also means that in converse the broker requires you to maintain a margin of $1 Dollar for every $400 that they give you so as to let you continue controlling the borrowed amount of capital that they have given you for trading.
XAUUSD Margin Example:
If you deposit $100, and the online broker gives you leverage of 1:400 then it means you now have $100*(1:400) = $40000 Dollars that you can now trade with.
Gold Money Management Guidelines for Trading with 1:400 Leverage
When trading xauusd with 1:400 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 principles should be written in your xauusd plan. If you're a beginner trader wanting to open a $100 dollar trading account and you don't know what xauusd money management guidelines are, you can use the learn xauusd lessons below to learn about what's xauusd funds management?
How Do I come up with xauusd money management rules for trading a 1:400 Leverage Trading Account.
Trading with Gold Leverage
The more leverage you use the greater the profit/loss
The less leverage which you use the lesser the profit/loss
It is hence better to use less leverage 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 trading leverage guide-lines: It's recommended to stay below 10:1 which is also still high, most professional funds managers use 2:1 ratio in their account.
To Learn and Know More about Leverage and Margin - Read the Topics Below:
XAUUSD Leverage and Margin Discussed
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