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What is The Difference Between Maximum Indices Trading Leverage and Used Indices Trading Leverage?


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


If your indices broker has given you 100:1 Maximum stock indexes trading leverage, but you only open 1 lot of 100,000 dollars then Used indices trading leverage is:

100,000 dollars (1 lot ): 10,000 dollars (your money)

10:1 Used Indices Trading Leverage



You have used 10:1 stock indexes trading leverage, but your maximum stock indices leverage is still 100:1. This means that even if you are given 100:1 Maximum indices trading leverage or 200:1 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 will still select 100:1 maximum leverage option for your 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 trading account then your stock indexes trades will not get closed by your indices broker because this margin requirement will remain above the required level.


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


Indices Trading Leverage Example

The example explained and 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 indices trader is: $268,307 - this is because with this indices trading leverage the indices trader has used little of his money and borrowed the rest, with this set at 100:1, the indices trader is using 1 % of their capital, this 1% is $2683.07, if 1% is $2683.07 then 100% is $268,307

What is The Difference Between Maximum Indices Trading Leverage and Used Indices Trading Leverage?

What is The Difference Between Maximum Indices Trading Leverage and Used Indices Trading Leverage?


In the above image example, the indices 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 indices trading account above even though the maximum indices trading leverage set stock indices leverage is 100:1, Used indices trading leverage is 16.64 : 1

 

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