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Leverage Definition

Leverage Calculator

The meaning of leverage is having ability to control a large amount of money using very little of your own money and borrowing the rest - this is what makes this market to attract many online traders.

What does a leverage ratio of 1 100 mean?

When Trading using leverage it means that you as a trader can open position positions which are bigger than if you were using only the amount of money in your trading account without leverage.

With leverage you as a trader can use your money which's in your account to borrow from your broker through what's known as xauusd/gold leverage. For illustration, if you have a gold account with $100 dollars - you as a trader can use your $100 and borrow using the leverage option of 1:100, which means that you will borrow $100 dollars from your broker for each $1 in your account and after leverage you'll have $100*(1:100 Leverage) = $10,000.

leverage is represented in format of a ratio:

For exemplification leverage option 1:100 or 1:50 or 1:10

Sometimes the leverage ratio also can be written as 100:1 or 50:1 or 10:1 depending on your broker.

The ratio just illustrates the amount of leverage whether it's written 100:1 or 1:100.

Leverage of 1:100 means you have borrowed using 1:100 & increased your capital 100 times.

Leverage of 1:50 means you have borrowed using 1:50 & increased your capital 50 times.

Leverage of 1:10 means you have borrowed using 1:10 & increased your capital 10 times.

Example:

We shall us this xauusd example to explain what xauusd leverage is? If your broker gives you xauusd leverage of 100:1 (this is the best option to choose as the max leverage for any account)

This means you borrow $100 for each one dollar you have in your gold account.

In other words your broker gives and provides you $100 dollars for each one dollar on your account. This is what is known as leverage.

This means that if you open a gold account with $1,000 & your trading leverage option is 100:1, then you get $100 for every $1 you that you have in your account, total amount that you will control is:

If for 1 dollar the broker gives and provides you 100

Then if you have 1,000 you will get a total of:

$1,000 * 100 = $100,000 dollars

Now you control 100,000 dollars of capital in your account that you as a trader can place trades with

Most new xauusd traders ask what xauusd leverage is best for $100, or $500 dollars, or $1,000 dollars xauusd account? - The best option to choose when registering a real account is always 100:1 and not 400:1.

Trading XAUUSD with Leverage

The more leverage you use the greater the profit/loss

The less leverage you use, the lesser the profit/loss

It is thence better to use less xauusd/gold leverage to minimize risks involved. The greater the leverage option used the greater the risks. This is one of leverage guide-lines not to use more than 5:1 xauusd trading leverage.

In gold trading leverage guide-lines: It is recommended to keep below 10:1 leverage which is also still high, most professional experienced money managers use 2:1 leverage ratio in their trading account.

To Learn & Know More about Leverage & Margin - Learn the Topics Listed Below:

Leverage and Margin Explained

More Guides and Topics:

Forex Market Traders Seminar Gala

Forex Market Traders Seminar

XAUUSD Broker