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

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

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

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

10:1 Used 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 Maximum trading leverage, you do not have to use all of it. It's best to keep your used trading leverage to a maximum of 10:1 but you'll still choose 100:1 maximum leverage option for your account. The extra trading leverage will give you what we call Free Indices Trading Margin, As long as you have some Free margin on your account then your stock trades won't get closed by your broker because this margin requirement will remain above required level.

When it comes to trading indices one of your indices trading rules: indices trading money management guide-lines on your trade plan should be to use below 5:1.

Leverage Example

The examples explained below, the set leverage option is 100:1, margin which is 1 percent is $2683.07, therefore the total amount controlled by trader is: $268,307 - this is because with this leverage the trader has used little of his money and borrowed the rest of the money, with this set at 100:1, trader is using 1% of their capital, this 1 percent equals to $2683.07, if 1% equals to $2683.07 then 100% is $268,307

What's the Difference Between Maximum Indices Leverage and Used Trading Leverage?

In the above image example, the trader is using $2683.07, 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 trading leverage set stock trade leverage is 100:1, Used leverage is 16.64 : 1