XAUUSD Leverage Example and Margin Example and Examples

Margin required : It is the amount of money your xauusd broker requires from you to open a position. It is expressed in percents.

Equity : It's the total amount of capital you have in your trading account.

Used margin : amount of money in your account which has already been used up when buying a xauusd contract, this contract is the one that is displayed in open positions. As a trader you can't use this amount of money after opening a trade because you have already used it & it is not available to you.

In other words, because your xauusd broker has opened up a position for you using the capital you have borrowed, you must maintain this usable margin for your trading account as a security to allow you to continue using this xauusd Leverage Examples he has given you.

Free margin : amount in your account that you can use to open new trades. This is the amount of money in your trading account that has not yet been xauusd trading Leverage Examples because you have not yet opened a trade using this money - this money is also very important for you as a investor because it enables you to continue holding your open trades as described below.

However, if you over use xauusd trading Leverage Example, this free margin will drop below a certain percent at which your xauusd broker will have to close all your positions automatically, leaving you with a big loss. Xauusd broker at this point closes all your position because if your positions are left open they would lose the money you have borrowed from them.

This is why you should always make sure you've a lot of free margin. To do this never trade more than 5 percentage of your gold account, in fact 2 percent is recommended.

Difference Between XAUUSD Leverage Example Set by the Broker and Used XAUUSD Leverage Example

If the set xauusd trading Leverage Example is 100: 1, what it means is that you can borrow up to 100 dollars for every dollar you have in your account, but you do not have to borrow all the 100 dollars for every dollar you have you can decide you want to borrow 50:1 or 20:1. In this case though the leverage option is set at 100:1 your used xauusd Leverage Example will be the 50:1 or 20:1 that you have borrowed to make a trade.

Example:

You have 1000 dollars (Equity)

Set 100:1

XAUUSD Leverage Example Used = Amount used /Equity

If you buy xauusd trading lots equal to 100,000 dollars that you'll have used

= 100,000/1000

= 100:1

If you buy gold lots equal to 50,000 dollars you will have used

= 50,000/1000

= 50:1

If you buy gold lots equal to 20,000 dollars you'll have used

= 20,000/1000

= 20:1

In these three cases you can see that even though the set is 100:1

The used is 100:1, 50:1, 20:1 depending on the size of xauusd lots traded.

So Why not Just Choose 10:1 option as the Maximum XAUUSD Leverage Example? Because to keep within the proper risk management rules it is even recommended that traders use less than this?

This question might seem straight forward but it is not, because when you trade you use borrowed money known A.K.A. XAUUSD Leverage Example. When you borrow capital from anyone or a bank you must maintain a security or collateral to acquire a loan, even if the security is based on monthly deduction from your salary, the same thing with XAUUSD.

In xauusd the security is known as margin. This is capital you deposit with your broker.

This is calculated in realtime as you trade. To keep your borrowed money you must maintain what is known as required capital (your deposit).

Now if Your XAUUSD Leverage Example is 100:1

When trading if you have $1,000 & use option 100:1 & buy 1 standard lot for $100,000 your margin on this transaction is $1000 dollars in your account, this is money which you'll lose if your open trade goes against you the other $99,000 that is borrowed, they will close the open xauusd trade transactions automatically once your $1,000 has been taken by the gold trading market.

But this is if your xauusd broker has set 0% XAUUSD Margin Requirement before closing your gold trades automatically.

For 20% requirement before closing your gold trades automatically, then your trades will be closed once your account balance gets to $200

For 50% requirement of this level before closing your gold trades automatically, then your trades will be closed once your account balance gets to $500

If they set 100% requirement of this level before closing your open positions automatically, then your trade will be closed once your balance gets to $1,000: Explanation the trade will close-out as soon as you execute it because even if you pay 1 pips spread your trading account balance will get to $990 and the needed percent is 100% i.e. 1,000 dollars, therefore your orders will immediately get closedout.

Most brokers do not set 100% requirement, but there are those who set 100% aren't suitable for you at all, select those set 50% or 20% margin requirements, in fact, those gold brokers that set their margin requirement at 20% are some of the best because the likely hood they close-out your trade is reduced as shown in examples above.

To know about this level which is calculated by your platform automatically - the MetaTrader 4 XAUUSD Platform will display this as "XAUUSD Margin Requirement", This will be displayed as a percentage the higher the percent the less likely your trades are to get closed.

For Example if

Using 100:1

If xauusd trading Leverage Example is 100:1 and you transact xauusd lots equal to $10,000

$10,000 dollars divide by 100:1, used capital is $100

Calculation:

= Capital Used * Percentage(100)

= $1,000/$100 * Percentage(100)

XAUUSD Margin Requirement = 1,000 %

Investor has 980% above required amount

Using 10:1

If xauusd trading Leverage Example is 10:1 and you transact xauusd lots equal to $10,000

$10,000 dollars divide by 10:1, used capital is $1000

Calculation:

= Capital Used * Percentage(100)

= $1,000/$1000 * Percent(100)

XAUUSD Margin Requirement = 100 %

Investor has 80% above required amount

Because when a trader has a higher xauusd trading Leverage Example means that they have more percentage above what is required(A.K.A. More "Free XAUUSD Margin") their open xauusd transactions are less likely to get closed. This is the reason why investors will choose option 100:1 for their account but according to their risk management rules, these investors won't trade above 5:1.

These Zones are Shown on the Software Image Below as an Example:

MT4 XAUUSD Platform