Trading Leverage Example & Margin Trading Examples & Examples

Margin required : It's the sum of money your broker requires from you as a trader to open a trade transaction. It's expressed in %s.

Equity : It is the total amount of capital you've in your account.

Used margin : amount of money in your account which has already been used up when buying a silver trading contract, this contract is one that is displayed in open trade positions. As a trader you can't use this sum of money after opening a trade because you have already used it & it is not available to you.

In other words, because your broker has opened up a trade transaction for you using the capital you've borrowed, you must maintain this usable margin for your account as a collateral so as to allow you to continue using this silver Trading Leverage Examples he has given you.

Free margin : amount in your account which you can use to execute new trades. This is amount of money in your trading account which has not yet been silver Trading Leverage Examples because you've not yet opened a trade transaction with this money - this sum is also very crucial for you as a trader because it enables you to continue holding your open transactions as it will be described below.

However, if you over use silver Trading Leverage Example, this free margin will drop below a certain percentage at which your broker will have to liquidate all of your trades automatically, leaving you with a large loss. broker at this point closes all your position because if your trades are left open they would lose the money you've borrowed from them.

This is why you should always make sure you've a lot of free margin. ToIn-order-to do this as a trader never trade more than 5 percentage of your account, in fact 2 percent is adviced.

Difference Between Leverage Example Set by the Broker & Used Trading Leverage Example

If the set silver Trading Leverage Example is 100: 1, it means that you can borrow up to 100 dollars for every dollar which you have in your account but you don't have to borrow all the $100 for every dollar you have, but you can decide to borrow 50:1 or 20:1. In this case allthough the leverage option set 100:1 your used silver Trading Leverage Example will be 50:1 or 20:1 that you have borrowed to make a trade transaction.

Example:

You have $1000 (Equity)

Set 100:1

Trading Leverage Examples Used = Amount used /Equity

If you buy silver trading lots equal to 100,000 dollars that you'll have used

= 100,000/1000

= 100:1

If you buy lots equal to 50,000 dollars you will have used

= 50,000/1000

= 50:1

If you buy lots equal to 20,000 dollars you'll have used

= 20,000/1000

= 20:1

In these three cases you can see that even though the set is 100:1

The used is 100:1, 50:1, 20:1 depending on the size of lots traded.

So Why not Just Select 10:1 option as the Maximum Silver Leverage Examples? Because to keep within the proper money management rules it is even adviced that traders use less than this?

This question might seem straight forward but it is not, because when you trade you use borrowed money known A.K.A. Trading Leverage Example. When you borrow trading capital from anyone or a bank you must maintain a security or collateral to get a loan, even if the security is based on monthly deduction from your salary, the same thing with Silver Trading.

In silver trading the security is known as margin. This is capital you deposit with your broker.

This is calculated in real-time as you trade. To keep your borrowed money you must maintain what is known as required capital (your deposit).

Now if Your Trading Leverage Examples is 100:1

When trading if you have $1,000 & use leverage option 100:1 and buy 1 standard lot for $100,000 your margin on this trade position is the $1000 dollars in your account, this is the money that you'll lose if your open trade transaction moves against you the other $99,000 that's borrowed, they will liquidate the open trade transactions automatically once your $1,000 has been taken by market.

But this is if your broker has set 0 % Silver Margin Requirement before liquidating your trades automatically.

For 20% requirement before liquidating your trades automatically, then your trades will be closed out once your trading account balance gets to $200

For 50 % requirement of this level before liquidating your trades automatically, then your trade transactions will be closed out once your account balance gets to $500

If they set 100% requirement of this level before closing out your open trades automatically, then your trade will be closed once your trade account balance gets to $1,000: Meaning the trade will close out as soon as you execute it because even if as a trader you pay 1 pip spread your account balance will get to $990 and needed percentage is 100 percent i.e. 1,000 dollars, therefore your trading orders will immediately get closed.

Most brokers don't set 100 % requirement, but there are those who set 100% are not appropriate for you at all, choose those set 50% or 20 percent margin requirement, in fact, those who set at 20% are some of the best because the likely-hood they liquidate your trade transaction is reduced as displayed in examples above.

To know about this level that is calculated by your platform automatically - The MT4 Silver Software will illustrate this as "Silver Margin Requirement", This will be displayed as a percentage higher the percentage the less likely your trades are to get liquidated.

For Example if

Using 100:1

If silver Trading Leverage Example is 100:1 and you transact lots equivalent to $10,000

$10,000 dollars divide by 100:1, used capital is $100

Calculation:

= Capital Used * Percentage(100)

= $1,000/$100 * Percentage(100)

Silver Margin Requirement = 1,000 %

InvestorTrader has 980% above the required sum

Using 10:1

If silver Trading Leverage Example is 10:1 and you transact lots equivalent to $10,000

$10,000 dollars divide by 10:1, used capital is $1000

Calculation:

= Capital Used * Percentage(100)

= $1,000/$1000 * Percentage(100)

Silver Margin Requirement = 100%

Investor has 80% above requirement amount

Because when a trader has a higher Trading Leverage Example means that they have more percent above what is required(A.K.A. More "Free Silver Margin") their open silver trading trades are less likely to get closed. This is the reason why traders will choose option 100:1 for their account but according to their risk management guidelines, they will not trade above 5:1 leverage ratio.

These Areas are Shown on The Software Image Below as an Example:

MT4 Silver Software