Trade Forex Trading

What's Difference Between Maximum Indices Leverage & Used Stock Indices Leverage?

You should note that there's a difference between maximum leverage ( leverage given by your broker which is the highest leverage you can trade with if you choose to) & used leverage ( leverage depending on the lots you've opened/open trade positions). One is the broker's (Maximum) & the other is trader's (Used). To explain this concept we shall use the example above:

If your broker has given you 100:1 Max leverage, but you only open trading lots of $100,000 dollars then Used leverage is:

100,000 dollars : $10,000 dollars (your money)

10:1 Used Stock Indices Leverage

You have used 10:1 leverage, but your max leverage is still 100:1. This means that even if you're given 100:1 Maximum trading leverage or 200:1 Max leverage, you do not have to use all of it. It is best to keep your used leverage to a maximum of 10:1 but you will still select 100:1 maximum leverage option for your account. The extra leverage will give you what we call Free Stock Index Margin, As long as you've some Free margin on your trading account then your stock index trades won't get closed by your broker because this margin requirement will remain above required level.

When it comes to stock indices trading one of your stock indices rules: stock indices money management guidelines on your stock indices plan should be to use below 5:1.

Indices Leverage Example

The example illustrated below, the set leverage is 100:1, the margin which is 1 % is $2683.07, therefore the total sum controlled by the trader is: $268,307 - this is because with this leverage the trader has used little of his money & borrowed the rest of the money, with this set at 100:1 ratio, the trader is using 1 % of their capital, this 1 % equals to $2683.07, if 1 % is equal to $2683.07 then 100 Percent is equal to $268,307

Used Indices Leverage

What is the Difference Between Maximum Stock Indices Leverage & Used Indices Leverage?

In the above image example, the trader is using $2683.07, the total controlled amount is $268,307, but account equity is 16,116.55, therefore used leverage is ($268,307 divide by 16,116.55) = 16.64 : 1

16.64 : 1

In the trading account above even though the max leverage set trading leverage is 100:1, Used leverage is 16.64 : 1