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 the market to attract many online traders.
What does a leverage of 1 100 mean?
When Trading using leverage it means that as a trader you can open trade positions which are bigger than if you were using only the amount of money in your trading account without leverage.
With leverage you can use your money which's in your account to borrow from your broker through what's known as xauusd leverage. For example, if you have a xauusd account with $100 dollars - you can use your $100 and borrow using the leverage option of 1:100, which means that you will borrow $100 from your broker for each $1 in your account & after leverage you will have $100*(1:100 Leverage) = $10,000.
leverage is written in the form of a ratio:
For example leverage ratio 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 explains 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 select as the maximum leverage for any account)
This means you borrow $100 for each one dollar you have in your gold trading account.
In other words your broker gives you $100 dollars for each one dollar in your account. This is what's referred to as leverage.
This means that if you open a xauusd account with $1,000 & your trading leverage ratio 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 you 100
Then if you have 1,000 you'll get a total of:
$1,000 * 100 = $100,000
Now you control 100,000 dollars of capital in your account that you can place trade transactions 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's therefore better to use less xauusd leverage to minimize risks involved. The higher the leverage used the greater the risks. This is one of leverage guidelines not to trade with more than 5:1 xauusd trading leverage.
In xauusd trading leverage guidelines: It is always advisable to stay below 10:1 which is still high, most professional money managers use 2:1 ratio in their account.
To Learn & Know More about Leverage and Margin - Read the Topics Below:
Leverage and Margin Described
