What's Difference Between Maximum Indices Leverage & Used Stock Indices Leverage?
You should note that there's a difference between maximum stock index trading leverage ( stock indices leverage given by your broker which is the highest stock indices leverage you can trade with if you choose to) & used stock index trading leverage ( stock indices 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 stock indices example above:
If your stock indices broker has given you 100:1 Maximum stock indices leverage, but you only open trading lots of 100,000 dollars then Used stock indices leverage is:
100,000 dollars : 10,000 dollars (your money)
10:1 Used Stock Indices Leverage
You have used 10:1 stock indices leverage, but your maximum stock indices leverage is still 100:1. This means that even if you are given 100:1 Maximum stock index trading leverage or 200:1 Maximum stock indices leverage , you do not have to use all of it. It is best to keep your used stock indices leverage to a maximum of 10:1 but you will still choose 100:1 maximum leverage option for your stock index trading account. The extra stock indices 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 will not get closed by your stock indices 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 stock indices leverage is 100:1, the margin which is 1% is $2683.07, therefore the total amount controlled by the trader is: $268,307 - this is because with this leverage the trader has used little of his money & borrowed the rest, with this set at 100:1, the trader is using 1 % of their capital, this 1% equals to $2683.07, if 1% is equivalent to $2683.07 then 100% is equivalent to $268,307
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 stock indices leverage is ($268,307 divide by 16,116.55) = 16.64 : 1
16.64 : 1
In the stock index trading account above even though the maximum stock indices leverage set stock index trading leverage is 100:1, Used stock indices leverage is 16.64 : 1
