Gold Trading Fundamentals

Leverage gives you greater exposure to the market. Think of leverage as a loan. If you have $1,000 and use it as collateral for a “loan” that equates to $100 for every one of your dollars, you have $100,000 to trade with. This larger position provides the trader with greater exposure to even smaller changes in price. In gold trading, for example, leverage could allow you to control $20,000 or $100,000 worth of gold with a relatively small initial deposit.

The benefit of leverage is that it allows traders to enter and control larger funds using a small margin. This is appealing to many traders, but it is important to remember that margin trading and leverage can be a double-edged sword as they can magnify both wins and losses. In the gold market, sudden price moves can quickly increase or decrease your profit or loss when you are trading on margin.

Margin is the amount of funds required in your trading account to open a transaction and maintain a position open.

Example of Margin:

The leverage ratio measures your total exposure compared to your margin. For example, if you open a trade worth $10,000 with $1,000 in available funds, you are leveraging 10:1. In a gold trade, this could mean controlling several ounces of gold with a fraction of its total value.

A Margin Call is a demand to add funds to your trading account. It occurs when your Equity balance falls to 99% of the Margin Requirement needed to maintain your trading positions. In CFD trading, your Equity balance should be no less than your Margin Requirement.

Margin Call

A Margin Call is a demand to add funds to your trading account. It occurs when your Equity balance falls to 99% of the Margin Requirement needed to maintain your trading positions. In CFD trading, your Equity balance should be no less than your Margin Requirement.