MetaTrader 4 Indices Trading Margin Level: Example of How to Calculate Indices Trading Leverage in MetaTrader 4
Margin required in this case is 1,000 dollars (your money) if it is expressed as a percentage of 100,000 dollars which you control it is:
If indices trading leverage = 100:1
1,000 / 100,000 * 100= 1%
Margin required = 1%
(1/100 *100= 1%)
'Trade Forex Trading - Please simplify because I am Beginner'
(Simplify - your indices trading capital is $1,000 after stock indices leverage you control $100,000 - $1,000 is what percent of $100,000 - it is 1%) that's your indices trading margin requirement for your stock indices trading account.
The indices trading margin example explained and illustrated below, the set stock index leverage ratio is 100:1, the indices trading 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, trader is using 1% of their capital, this 1% equals to $2683.07, if 1% equals to $2683.07 then 100% is $268,307
MetaTrader 4 Indices Trading Margin Level: Example of How to Calculate Indices Leverage in MetaTrader 4
- If = 50:1 Indices Leverage - Used Indices Trading Leverage
Then indices margin requirement = 1/50 *100= 2%
If you have $1,000,
1,000* 50 = $50,000.
1,000 / 50,000 * 100= 2%
(Simplify - your indices trading capital is $1,000 after stock indices leverage you now control $50,000 - $1,000 is what percentage of $50,000 - it is 2 %) that's your indices trading margin requirement
- If = 20:1 Indices Trading Leverage - Used Indices Trading Leverage
Then the indices trading margin requirement = 1/20 *100= 5%
If you have $1,000,
1,000* 20 = $20,000.
1,000 / 20,000 * 100= 5%
(Simplify - your indices trading capital is $1,000 after stock indices leverage you now control $20,000 - $1,000 is what percent of $20,000 - it's 5 %) that's your indices trading margin requirement
- If = 10:1 Stock Indices Trading Leverage - Used Indices Trading Leverage
Then the indices margin requirement is = 1/10 *100= 10%
If you have $1,000,
1,000* 10 = $10,000.
1,000 / 10,000 * 100= 10%
(Simplify - your indices trading capital is $1,000 after stock indices leverage you now control $10,000 - $1,000 is what percent of $10,000 - it's 10 %) that is your indices trading margin requirement
What's Difference Between Maximum Indices Trading Leverage & Used Stock Indices Trading Leverage?
However, you should note that there is a difference between maximum indices trading leverage ( indices trading leverage given by your indices broker which is the highest stock indices leverage you can trade with if you choose to) & used indices trading leverage ( indices trading leverage depending on lots you have opened/open trades). One is the broker's (Maximum Indices Leverage) & the other is indices trader's (Used Indices Trading Leverage). To explain this indices trading used stock indices trading leverage & maximum indices trading leverage concept we shall use stock indices trading example above:
If your indices broker has given you 100:1 Maximum Indices Trading Leverage, but you only open a trade of 10,000 dollars then Used Indices Trading Leverage is:
10,000 dollars: 1,000 dollars (your money)
10:1
Your have used 10:1 Indices Trading Leverage, but your maximum stock indices leverage is still 100:1 Indices Trading Leverage. This means that even if you are given 100:1 Maximum Indices Trading Leverage or 400:1 Maximum Indices Trading Leverage, you do not have to use all of it. It is best to keep your used indices trading leverage to a maximum of 10:1 but you'll still choose 100:1 maximum stock indices leverage option for your indices trading account. The extra indices trading leverage will give you what we call Free Indices Trading Margin, As long as you have some Free margin on your indices trading account then your open stock indices trades will not get closed by your indices broker because this margin requirement will remain above required level.
When it comes to indices trading one of your rules: indices trading money management rules on your indices trading plan should be to use indices trading leverage below 5:1.
In the above MetaTrader 4 indices trading screenshot example, the trader is using $2683.07, total controlled amount is $268,307, but indices trading account equity is $16,116.55, therefore used stock index leverage is ( $268,307 divide by 16,116.55 ) = 16.64 : 1
16.64 : 1 Used Indices Trading Leverage
Indices Margin accounts allows traders to control a large amounts of indices trading units using leverage using little of their own capital while borrowing the rest
Obtaining this indices trading account will enable you to borrow money from the broker to trade indices lots with.
The amount of borrowing power your account gives you what is called ' indices leverage', and is usually expressed as a ratio - a ratio of 100:1 leverage means you can control resources worth 100 times your deposit amount.
What this means in Indices Trading terms is that with 1 % margin in your indices account you can control a trade worth $100,000 with a $1,000 deposit.
However, Trading this margin indices trading account increases both potential for trading profits as well as losses. In Indices Trading you can never lose more than you deposit, losses are limited to your deposits and usually brokers will close a transaction that extends beyond your deposited amount by executing what is referred to as a margin call. Indices traders must therefore try to keep their margin requirement level above that required. By using indices trading money management rules & keeping your used indices leverage below 5:1.
