What's the Best Leverage to Use in XAUUSD?
Best Leverage for Micro Account
The definition of 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 market to attract many investors.
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 account without leverage.
With leverage you can use your money that's in your account to borrow from your broker through what's known as leverage. For examples if you have a account with $100 - you can use your $100 & borrow using the leverage of 1:100, which means that you'll borrow $100 from your broker for every $1 in your account & after leverage you will have $100*(1:100 Leverage) = $10,000.
leverage is written in the forms of a ratio:
For example leverage 1:100 or 1:50 or 1:10
Sometimes the leverage ratio option can also be written as 100:1 or 50:1 or 10:1 depending on your broker.
This ratio just explains the amount of leverage whether it's written 100:1 or 1:100.
Leverage of 1:100 means you've borrowed using 1:100 and 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 example to explain what leverage is? If your broker gives you leverage of 100:1 (this is the best option to select as the maximum leverage for any account)
This means you borrow $100 for every dollar you've in your gold account.
To put in another way your broker gives you $100 for every one dollar in your account. This is what is referred to as leverage.
This means if you open a account with $1,000 & your leverage ratio option is 100:1, then you get $100 for every $1 you that you have in your account, the total amount that you'll control is:
If for 1 dollar the broker gives 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 of capital in your account that you can open trades with
Most new traders ask what leverage is best for $100 dollars, or 500 dollars, or $1,000 account? - The best option to select when opening a live account is always 100:1 & not 400:1.
Trading with Leverage
The more leverage you use the more the profit or loss
The less leverage you use lesser the profit or loss
It's therefore better to use less leverage so as to minimize risks involved. The higher the leverage used the higher the risk. This is one of the leverage guidelines not to trade with more than 5:1 leverage.
In leverage guidelines: It's always advisable to stay below 10:1 which is still high, most professional money managers use 2:1 in their account.
To Learn and Know More about Leverage & Margin - Read the Topics Below:
What's the Best Leverage for $100?
What's a Trading Plan? - Writing Plan Example Template
Alternatives: Automated Robots EAs or Copy Paste Signals
