What's 1:400 Indices Leverage for $100 Mean?
Indices Leverage in indices is the ratio of a trader's money to that of the borrowed capital which has been borrowed from the broker.
For example 1:400 trading leverage means that for each 1 dollar a trader has in their trading account they have borrowed 400 from their trading broker. Therefore if a trader has $100 in their trading account they will have borrowed using 1:400 stock trading leverage and therefore after leverage of 1:400 they will have $100*1:400 stock trading leverage & this will be equal to $40000 dollars capital.
Indices Leverage is use of borrowed funds in indices so that to trade much larger volumes so as to increase the profit potential of trade transactions.
1:400 trading leverage basically means that as a trader you get $400 for every $1 in your trading account.
1:400 Indices Leverage for $100 Indices Account
In Indices, a small deposit can control a much bigger trade this is called Indices Leverage, which gives the traders the ability to make more profits on opened trades, and at same time keep risk capital to a minimum.
A trader will transact on borrowed capital, having $100 trader can borrow the rest using a leverage option such as 1:400 - meaning that one borrows $400 dollars for every 1 dollar they have in their trading account, therefore in total they will control a total of $40000 dollars without having to deposit all of it - this is how trading leverage works in stock indices trading.
Indices Leverage is expressed in forms of a ratio, for Examples 1:400, means the broker with give a trader $400 Dollars for every 1 dollar which the trader has.
Indices Margin is amount of money required by your broker so that to allow you to continue trading with the trading leveraged amount. Indices Margin is the amount you deposit so that to open an account with. If you deposit $100 then that's your trading margin.
With indices leverage it is possible for retail traders to trade the trading market. Indices Leverage of 1:400 means that for every dollar you deposit, the broker will give you 400 dollars. This also means that in converse the broker requires you to maintain a margin of $1 Dollar for every $400 Dollars that they give you so as to let you continue controlling the borrowed amount of capital that they have given you for trading.
Indices Margin Example:
If you deposit $100, and the online broker gives you stock leverage of 1:400 then it means you now have $100*(1:400) = $40000 Dollars that you can now trade with.
Indices Money Management Guide-lines for Trading with 1:400 Indices Leverage
When indices trading with 1:400 stock leverage you should create your trading money management rules that you'll use to manage your trading account capital. This set of trading money management guide-lines should be written in your trading plan. If you're a beginner trader wanting to open a $100 dollar trading account and you don't know what indices trading money management guide-lines are, you can use learn indices courses below to learn about what is trading money management?
How to come up with indices money management rules for trading a 1:400 Indices Leverage Account.
About Leverage
The more leverage you use the more the profit or loss
The less leverage that you use the lesser the profits or losses
It's therefore better to use less trading leverage so that to minimize the risks involved. The higher the leverage used the higher the risk. This is one of the leverage guide-lines not to trade with more than 5:1 stock leverage.
In leverage guide-lines: It's always advisable to stay below 10:1 which is still high, most professional money managers use 2:1 in their account.
To Learn and Know More about Leverage and Margin - How to Read the Topics Below:
Indices Leverage & Margin Explained
What's a Trade Plan? - Written Plan Example Template
Alternatives: Automated EA Trading or Copy and Paste Signals
