What is Difference Between Maximum Stock Indices Trading Leverage & Used Indices Trading Leverage?
You should note that there's 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) & used indices trading leverage ( indices 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 indices trading example above:
If your indices broker has given you 100:1 Maximum stock indices trading leverage, but you only open trading lots of 100,000 dollars then Used indices trading leverage is:
100,000 dollars : 10,000 dollars (your money)
10:1 Used Indices Trading Leverage
You have used 10:1 stock indices 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'll still choose 100:1 maximum 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 trading account then your stock indices trades will not get closed by your indices 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 rules on your indices trading plan should be to use below 5:1.
Stock Indices Trading Leverage Example
The examples explained below, the set stock index leverage ratio is 100:1, margin which is 1% is $2683.07, therefore the total amount controlled by indices trader is: $268,307 - this is because with this leverage the trader has used little of his money and 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
What is the Difference Between Maximum Indices Trading Leverage & Used Stock Indices 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 stock index 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 trade leverage is 100:1, Used indices leverage is 16.64 : 1
