Do You Have to Use Leverage in Gold?
The definition of XAUUSD Trading Leverage is having ability to control a large amount of money using very little of your own money & borrowing the rest - this is what makes the gold market to attract many traders.
We shall explain xauusd leverage first & then explain xauusd trading margin in this learn how to calculate xauusd leverage & margin xauusd guide.
XAUUSD Trading Example:
We shall us this xauusd example to explain what xauusd leverage is? If your xauusd broker gives you xauusd leverage ratio of 100:1 (this is the best option to select as the maximum xauusd leverage for any xauusd account)
This means you borrow 100 dollars for every dollar you've in your gold trading account.
To put in another way your xauusd broker gives you 100 dollars for every 1 dollar in your xauusd account. This is what's referred to as gold trading leverage.
This means if you open a xauusd account with $1,000 and your xauusd leverage ratio is 100:1, then you get $100 for every $1 you that you have in your trading account, the total amount that you will control is:
If for 1 dollar the broker gives you 100
Then if you have 1,000 in your xauusd account you will get a total of:
$1,000 * 100 = 100,000 dollars
Now you control 100,000 dollars of Capital after xauusd trading leverage
Most new xauusd traders ask what xauusd leverage is best for 2,000 dollars, or 5,000 dollars, or 10,000 dollars xauusd trading account? - The best xauusd leverage ratio to select when opening a live XAUUSD Trading account is always 100:1 & not 500:1.
What's XAUUSD Trading Margin?
XAUUSD Trading Margin is the amount of money required by your xauusd broker so as to allow you to continue xauusd with the borrowed amount - leveraged amount.
In other words the question what is margin in XAUUSD? can be explained as the money required by your xauusd broker to cover open gold trades and is expressed as a percentage. For 100:1 leverage, the amount you will control is 100,000 dollars as explained in the gold trading example above.
Now can you compare an investor investing $1,000 with another investor investing $100,000? Obviously Not. This is how leverage works in xauusd, it takes you from that guy investing $1,000 to that one investing $100,000. Where does this extra money come from? You borrow from your xauusd broker in what's simply referred to as XAUUSD Trading Leverage. This money that you borrow from your gold trading broker, you borrow it against the $1,000 dollar of your own money that you deposit with your xauusd broker in your gold trading account. If you were to define what this xauusd trading leverage means - then leverage is the ability to control a big amount of money using very little of your own money and borrowing the rest. Otherwise, if you were trade xauusd trading without this xauusd trading leverage it would not be as profitable as it is, in fact you can still choose not to use gold trading leverage, using the 1:1 leverage ratio but you would not make money it would take too long to make any xauusd trading profit.
Example of how to calculate xauusd leverage & xauusd margin:
XAUUSD Margin required in this case is 1,000 dollars (your money) if it's expressed as a percentage of 100,000 dollars in your xauusd account which you control it is:
If xauusd leverage ratio = 100:1
1,000 / 100,000 * 100= 1%
XAUUSD Trading Margin required = 1%
(1/100 *100= 1%)
"Trade Forex Trading - Please simplify because I am a XAUUSD Trading Beginner"
(Simplify - your xauusd trading capital is $1,000 - after xauusd leverage you control $100,000 - $1,000 is what percent of $100,000 - it is 1 %) that's your xauusd trading margin requirement for your gold trading account.
The xauusd margin example shown below, the set xauusd leverage ratio is 100:1, the xauusd trading margin which is 1% is $2683.07, therefore the total amount controlled by the trader is: $268,307 - this is because with this leverage the trader has used little of his money and borrowed the rest, with this leverage ratio set at 100:1, the trader is using 1% of their capital, this 1% equals to $2683.07, if 1% is equal to $2683.07 then 100% is equal to $268,307
MT4 Transactions Panel - What is XAUUSD Leverage for Beginners?
- If = 50:1 XAUUSD Trading Leverage Ratio
Then xauusd margin requirement = 1/50 *100= 2%
If you have $1,000,
1,000* 50 = $50,000.
1,000 / 50,000 * 100= 2%
(Simplify - your xauusd capital is $1,000 after xauusd leverage you control $50,000 - $1,000 is what percent of $50,000 - it is 2%) that is your xauusd margin requirement
- If = 20:1 XAUUSD Trading Leverage Ratio
Then the xauusd margin requirement = 1/20 *100= 5 %
If you have $1,000,
1,000* 20 = $20,000.
1,000 / 20,000 * 100= 5%
(Simplify - your xauusd capital is $1,000 after xauusd leverage you control $20,000 - $1,000 is what percentage of $20,000 - it is 5%) that is your xauusd trading margin requirement
- If = 10:1 XAUUSD Trading Leverage Ratio
Then the xauusd trading margin requirement is = 1/10 *100= 10 %
If you have $1,000,
1,000* 10 = $10,000.
1,000 / 10,000 * 100= 10%
(Simplify - your xauusd trading capital is $1,000 after xauusd leverage you now control $10,000 - $1,000 is what percent of $10,000 - it's 10 %) that is your xauusd trading margin requirement
What is the Difference Between Maximum XAUUSD Leverage & Used XAUUSD Trading Leverage?
However, you should note that there is a difference between maximum xauusd trading leverage (xauusd trading leverage given by your gold trading broker which is the highest xauusd leverage ratio you can trade with if you choose to) and used xauusd trading leverage ( xauusd trading leverage depending on the xauusd lot size you have opened - open trade lots positions). One is the broker's (Maximum XAUUSD Leverage Ratio) and the other is xauusd trader's (Used Leverage Ratio). To explain this xauusd leverage concept we shall use gold trading example above:
If your xauusd broker has given you 100:1 Maximum XAUUSD Leverage Ratio, but you only open a trade of 10,000 dollars then Used XAUUSD Trading Leverage is:
10,000 dollars: 1,000 dollars (your money)
10:1
Your have used 10:1 XAUUSD Trading Leverage Ratio, but your maximum leverage ratio is still 100:1 Leverage. This means that even if you're given 100:1 Maximum XAUUSD Trading Leverage Ratio or 500:1 Maximum XAUUSD Leverage Ratio, you do not have to use all of it. It is best to keep your used xauusd leverage ratio to a maximum of 10:1 xauusd trading leverage but you will still select 100:1 maximum xauusd leverage ratio for your gold trading account. The extra xauusd leverage will give you what we call Free XAUUSD Margin, As long as you have some Free margin on your xauusd account then your gold trades will not get closed by your gold trading broker because this margin requirement will remain above the required level based on the free margin in your gold trading account.
When it comes to xauusd - one of your rules: xauusd money management rules on your xauusd plan should be to use xauusd leverage ratio of below 5:1.
In the above xauusd trading example, the trader is using $2683.07, total controlled amount is $268,307, but xauusd account equity is $16,116.55, therefore used xauusd trading leverage is ($268,307 divide by 16,116.55) = 16.64 : 1
16.64 : 1 Used XAUUSD Trading Leverage Ratio
XAUUSD Trading margin accounts allow gold traders to control a big amount of currency using little of their own money while borrowing the rest
Obtaining this xauusd margin account will enable you to borrow money from the broker to trade gold trading lots with.
The amount of borrowing power your margin xauusd account gives you what's called 'leverage', and is usually expressed as a ratio - a leverage ratio of 100:1 means you can control resources worth 100 times your deposit.
What this means in xauusd terms is that with 1 % margin in your xauusd account you can control one standard xauusd lot or 1 xauusd trading contract worth $100,000 with a $1,000 deposit.
However, trading on this margin xauusd account increases both potential for xauusd trading profits as well as xauusd trading losses. In xauusd trading you can never lose more than you invest, xauusd trading losses are limited to your deposits and usually xauusd brokers will close a xauusd trade transaction that extends beyond your deposit amount by executing a xauusd trading margin call. XAUUSD traders must therefore try to keep their xauusd trading margin level above that required by their gold trading broker. By using xauusd trading money management rules & keeping your used xauusd leverage ratio below 5:1.
What is XAUUSD Trading Leverage for Beginners? - Do You Have to Use Leverage in XAUUSD? - Leverage in Gold - XAUUSD Leverage Example - XAUUSD Leverage and Margin Explained - XAUUSD Trading Leverage Calculator
