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


You should note that there is a difference between maximum stock trading leverage ( stock trading leverage given by your broker which is the highest stock leverage you can trade with if you choose to) and used stock trading leverage ( stock 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 stocks trading example above:


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

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

10:1 Used Stock Trading Leverage



You have used 10:1 stocks trading leverage, but your maximum stock leverage is still 100:1. This means that even if you are given 100:1 Maximum stock trading leverage or 200:1 Maximum stock trading leverage , you do not have to use all of it. It is best to keep your used stock trading leverage to a maximum of 10:1 but you will still select 100:1 maximum leverage option for your stock trading account. The extra stock trading leverage will give you what we call Free Stocks Trading Margin, As long as you have some Free margin on your trading account then your stocks trades will not get closed by your stock broker because this margin requirement will remain above the required level.


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


Stock Trading Leverage Example

The example explained below, the set stock leverage is 100:1, the margin which is 1% is $2683.07, therefore the total amount controlled by the stock trader is: $268,307 - this is because with this stock trading leverage the stock trader has used little of his money and borrowed the rest, with this set at 100:1, the stock 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 Stock Trading Leverage and Used Stock Trading Leverage?

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


In the above image example, the stock trader is using $2683.07, the total controlled amount is $268,307, but account equity is 16,116.55, therefore used stock leverage is ($268,307 divide by 16,116.55) = 16.64 : 1


16.64 : 1


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

 

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