Gold Trading Leverage Definition
What is XAUUSD Trading Leverage in XAUUSD Trading?
The definition of gold leverage is having the ability to control a big amount of money using very little of your own money and borrowing the rest - this is what makes the xauusd market to attract many investors.
What does a XAUUSD leverage of 1 100 mean?
When Gold Trading using trading leverage it means that as a trader you can open trade positions which are larger than if you were using only the amount of money in your gold trading account without xauusd trading leverage.
With gold leverage you can use your money that's in your xauusd trading account to borrow from your gold broker through what's known as xauusd leverage. For examples if you have a gold trading account with $100 dollars - you can use your $100 & borrow using the gold leverage of 1:100, which means that you will borrow $100 from your gold broker for every $1 in your xauusd account and after gold leverage you will have $100*(1:100 Gold Trading Leverage) = $10,000.
xauusd trading leverage is written in the forms of a ratio:
For example gold trading leverage 1:100 or 1:50 or 1:10
Sometimes the gold leverage ratio can also be written as 100:1 or 50:1 or 10:1 depending on your xauusd trading broker.
This ratio just explains the amount of gold trading leverage whether it is written 100:1 or 1:100.
Gold Leverage of 1:100 means you have borrowed using 1:100 and increased your trading capital 100 times.
Gold Leverage of 1:50 means you have borrowed using 1:50 and increased your trading capital 50 times.
Gold Leverage of 1:10 means you have borrowed using 1:10 and increased your trading capital 10 times.
Example:
We shall us this xauusd examples to explain what gold trading leverage is? If your gold broker gives you gold leverage of 100:1 (this is the best option to choose as the maximum gold leverage for any gold trading account)
This means you borrow 100 dollars for every dollar you have in your xauusd trading account.
To put in another way your gold broker gives you 100 dollars for every 1 dollar in your xauusd trading account. This is what's known as xauusd trading leverage.
This means if you open a gold trading account with $1,000 and your gold leverage is 100:1, then you get $100 for every $1 you that you've in your account, the total amount that you'll control is:
If for 1 dollar the broker will give you 100
Then if you have 1,000 you'll get a total of:
$1,000 * 100 = 100,000 dollars
Now you control 100,000 dollars of capital in your xauusd trading account that you can open trades with
Most new gold traders ask what gold leverage is best for 100 dollars, or 500 dollars, or 1,000 dollars gold trading account? - The best option to select when opening a live xauusd trading account is always 100:1 and not 400:1.
Gold Trading with XAUUSD Trading Leverage
The more xauusd trading leverage you use greater the profits or losses
The less xauusd trading leverage you use the lesser the profits or losses
It is therefore better to use less gold trading leverage in order to minimize the risks involved. The higher the gold leverage used the higher the risk. This is one of the gold trading leverage rules not to trade with more than 5:1 xauusd trading leverage.
In gold leverage rules: It is always advisable to stay below 10:1 which is still high, most professional money managers use 2:1 in their gold trading account.
To Know More about Gold Leverage & Margin - Read the Topics Below:
Gold Leverage & Gold Margin Described
