What is Stocks Trading Margin Trading Account?
How to Calculate Leverage and Stocks Trading Margin
The meaning of Leverage is having the ability to control a big amount of money using very little of your own money and borrowing the rest - this is what makes the stock trading market to attract many investors.
We shall explain stocks leverage first and then explain stocks trading margin in this learn how to calculate stocks leverage and stocks margin tutorial.
Example:
We shall us this example to explain what stocks leverage is? If your broker gives you stocks leverage of 100:1 (this is best option to select as a maximum for any account)
This means you borrow 100 dollars for every dollar you've in your Stocks Trading account.
To put in another way your stocks broker gives you 100 dollars for every 1 dollar in your trading account. This is what is known as stocks trading leverage.
This means if you open an account with $1,000 and your stock trading leverage is 100:1, then you will get $100 for every $1 you that you've, the total amount which you will 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 dollars of Investment
Most new stocks traders ask what stocks leverage is best stocks leverage for 1,000 dollars, or 2,000 dollars, or 5,000 dollars stocks account? - The best stocks leverage option to choose when opening a live Stocks Trading account is always 100:1 and not 400:1.
What is Stock Trading Margin?
This is the amount of money required by your broker so as to allow you to continue trading with the borrowed amount.
In other words the question what's stocks trading margin in Stocks? can be described as money required to cover open stock trades & is expressed in percent. For 100:1, the amount you'll control is 100,000 dollars as described in the above examples.
Now can i compare someone investing $1,000 with another one investing $100,000? Obviously Not. This is how it works, it takes you from that guy investing $1,000 to that one investing $100,000. Where does this extra money originate from? You borrow from your stocks broker in what is simply referred to as Leverage. This money which you borrow, you borrow it against the $1,000 dollar of your own money which you deposit with your stock trading broker. If you were to explain what this stocks leverage means - then it is the ability to control a large amount of money using very little of your own money & borrowing the rest. Otherwise, if you were trade Stocks Trading without this stocks leverage it would not be as profitable as it is, in fact you can still select not to use stocks leverage, using 1:1 leverage option but you wouldn't make money and it would take too long to make any profit.
Example of how to calculate stocks leverage and stocks trading margin:
Stocks Trading Margin required in this case is 1,000 dollars (your money) if it is expressed as a percentage of 100,000 dollars which you control it is:
If leveraging = 100:1
1,000 / 100,000 * 100= 1%
Stocks Trading Margin required = 1%
(1/100 *100= 1%)
"Trade Forex Trading - Please simplify because I am Beginner"
(Simplify - your capital is $1,000 after stocks leverage you control $100,000 - $1,000 is what percent of $100,000 - it is 1%) that is your stocks trading margin requirement for your stock trading account.
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