How leverage for spot gold works+
Leverage for spot gold trading is set at 100:1. This means that for every $1 you have in your account balance, you have $100 in buying and selling power for gold trading. As a result, leverage increase a client's buying and selling power and enables clients to participate in a market that may otherwise be cost prohibitive. Keep in mind that increasing leverage increases risk.
How margin for spot gold works
Margin is the amount of money you must have in your account to hold a particular trade. At 100:1 leverage, your margin factor is 0.01 (1%). This means that you are required to have a minimum cash balance of 1% of the total value of the positions you hold in your account at any one time. If you fall below this amount, your trade may be closed, otherwise known as being liquidated.
Let's look at an example:
Let's say you would like to place a trade of 1 lot (10 troy oz) of spot gold, and you would like to buy it at $920.55. The amount of margin you would be required to maintain would be 1% of your trade size.
So, 10 (oz) multiplied by the price, 920.55 and multiplied by the margin factor, 0.01 would give you $92.06.
10 x 920.55 = $9,205.50
$9,205.50 x .01 = $92.06
This is the margin requirement for a single lot of spot gold bought at $920.55. If your account balance falls below this level, your trade would be closed. Another way to look at this example is to say that 100:1 leverage gives you the ability to trade 10 ounces of gold, at 920.55, with $92.06.
