What's the Best Leverage to Use in XAUUSD?
Best Leverage for Micro Account
The meaning 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 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 account without leverage.
With leverage you can use your money which's in your trading account to borrow from your broker through what's known as leverage. For example, if you have a account with $100 - you can use your $100 & borrow using the leverage ratio of 1:100, which means that you'll borrow $100 from your broker for every $1 in your account and after leverage you will have $100*(1:100 Leverage) = $10,000 dollars.
leverage is written in the forms of a ratio:
For example leverage 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've borrowed using 1:100 and increased your capital 100 times.
Leverage of 1:50 means you have borrowed using 1:50 and increased your capital 50 times.
Leverage of 1:10 means you have borrowed using 1:10 and increased your capital 10 times.
Example:
We will use this example to explain what leverage is? If your broker assigns you leverage of 100:1 (this the best option to select as the maximum leverage for any account)
This means you borrow $100 for every $1 you've in your gold account.
To put in another way your online 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 trading 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 trading account that you as a trader can open trades with
Many beginner traders ask which leverage is best for $100, or $500, or $1,000 account? - The best option to select when registering a real account is 100:1 and not 400:1.
Trading with Leverage
The more leverage you as a trader use the greater the profit/loss
The less leverage you as a trader use lesser the profit/loss
It's hence better to use less leverage so as to minimize risk involved. The higher the leverage used the greater the risks. This is one of 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 leverage in their account.
To Learn and Know More about Leverage and Margin - Read the Topics Below:
What's the Best Leverage for $100?
