Indices Leverage Formula

How to Calculate Leverage & Margin

The meaning of indices leverage is having the ability to control a large amount of money using very little of your own money & borrowing the rest - this is what makes the indices market to attract many investors - Indices Leverage Synonym - Stock Indices Gearing.

What does indices leverage ratio of 1:100 mean?

When Trading Indices using leverage it means that as a trader you can open trades that are larger than if you were using only the amount of money in your trading account without indices trading leverage.

With indices leverage you can use your money that is in your stock indices trading account to borrow from your online indices broker through what is referred to as indices leverage. For examples if you have a indices trading account with $100 dollars - you can use your $100 and borrow using indices leverage of 1:100, which means that you will borrow $100 from your indices broker for every $1 in your stock indices account and after leverage you will have $100*(1:100 Stock Indices Leverage Ratio) = $10,000.

Indices leverage is written in the forms of a ratio:

For example leverage ratio of 1:100 or 1:50 or 1:10

Sometimes the leverage ratio can also be written as 100:1 or 50:1 or 10:1 depending on the broker you are trading with.

This leverage ratio just explains the amount of indices leverage whether it is written 100:1 or 1:100.

Stock Indices leverage ratio of 1:100 means you have borrowed using 1:100 and increased your indices trading capital 100 times.

Leverage of 1:50 means you have borrowed using 1:50 and increased your trading capital 50 times.

Leverage of 1:10 means you have borrowed using 1:10 & increased your indices trading capital 10 times.

Indices Leverage Example:

We shall us this stock indices examples to explain what indices trading leverage is? If your indices broker gives you leverage of 100:1 (this is best option to select as the maximum indices leverage for any indices trading account)

This means you borrow 100 dollars for every dollar you have in your stock indices trading account.

To put in another way your indices broker gives you 100 dollars for every 1 dollar in your stock indices account. This is what is referred to as indices trading leverage.

This means if you open a indices trading account with $2,000 and your leverage is 100:1, then you get $100 for every $1 you that you have in your indices account, the total amount of capital you'll control is:

If for 1 dollar the broker gives you 100

Then if you have 2,000 you'll get a total of:

$2,000 * 100 = 200,000 dollars

Now you control 200,000 dollars of capital in your stock indices trading account that you can open stock indices trades with

Most new indices traders ask what indices leverage ratio is best for 1000 dollars, or 5000 dollars, or 10,000 dollars indices account? - The best option to select when opening a live Indices account is always 100:1 & not 500:1.

About Indices Trading Leverage

The more indices leverage you use the more the profit or loss

The less indices leverage you use the lesser the profits or losses

It is therefore better to use less indices leverage so as to minimize the risks involved. The higher the stock indices leverage used the higher the risk. This is one of the indices leverage rules and indices money management rules not to trade with more than 5:1 indices trading leverage.

In Indices leverage money management rules: It is always advisable to use indices leverage ratio below 10:1 which is still high, most professional money managers use indices leverage ratio of 2:1 meaning they trade only 2% of their indices trading account.

To Learn about Stock Indices Leverage & Margin: